The Karen, an ethnic minority group in Burma, have experienced a prolonged state of exile in refugee camps in neighboring Thailand because of ethnic conflict in their home country. Nursery schools in the three largest Karen refugee camps aim to promote the psychosocial development of young children by providing a child-centered, creative, learning-friendly environment. Psychosocial development and potentially concerning behaviors of two to five-year-old children in nursery schools were examined by use of a psychosocial checklist. The results showed that psychosocial development of the children increased with age, with most five year olds being proficient in playing cooperatively with other children. Sadness or emotional outbursts were observed for a third of the children. Difficulty separating from parents was also observed. The results also showed that children who attended the nursery schools for more than a year were better at playing cooperatively with other children and were more aware of their own and others' feelings. On the other hand, children who were newer to the nursery schools were more polite and better at following rules and controlling their feelings when frustrated. The results indicate that nursery schools can be a promising practice to promote healthy psychosocial development of children in protracted refugee situations.