There is persistent evidence showing that care leavers tend to have lower educational outcomes compared to their peers. There is, however, less knowledge of whether this educational disadvantage transfers to the second generation. This study adopts a developmental contextual life-course approach to examine: (a) the extent of educational inequality of children of care leavers from school entry to public examinations at age 16; (b) the relative role of different psychosocial family resources as predictors of educational attainment; and (c) the role of early school readiness assessments as predictors of later educational attainment. Drawing on data collected from families living in England at the first sweep of the nationally representative UK Millennium Cohort Study (MCS) (n = 11,514), the findings suggest intergenerational transmission of educational disadvantage among children of care leavers (n = 287), which is manifest in a direct assessment of school readiness (age 3), at the Early Years Foundation Stage (EYFS) (age 5) and in General Certificate of Secondary Education (GCSE) attainment (age 16). However, once inequalities in family socio-economic background or area deprivation and housing are controlled for, children of care leavers perform comparably in their educational progression to those whose mothers had no experience of being in care (n = 11,227). Moreover, the findings highlight the significance of early school readiness assessments in predicting later educational attainment for the whole sample. Findings are discussed regarding their implications for policy, in particular the need to address educational inequality for children in care, area allocation and housing that is offered to care leavers, and the general importance of early interventions.