With recent legislation placing a strong emphasis on the transition of welfare mothers into the workforce, it becomes increasingly important to understand whether and how participation in child care has implications for the development of children from welfare families. This study focused on a sample of 182 African-American families, all of whom had applied for or were receiving Aid to Families with Dependent Children, and each with a child between 3 and 5 years of age. The study first examined which of a wide range of background characteristics predicted the use of a formal child care arrangement. It then examined whether the children's cognitive and social development were predicted by current participation in formal child care, above and beyond the background characteristics associated with the use of formal child care. Results indicated that use of formal child care is associated with significantly higher scores on a measure of cognitive development. (Contains 40 references.) (Author)