The aim of this article is to explore democracy and agency for children with diverse backgrounds in Icelandic early childhood education and care. In the last decade, Icelandic society has become more multicultural, as reflected in the increasing number of children in preschools with a home language other than Icelandic. Hence, this article also aims to promote a discussion of how Nordic traditions can be reflected in preschool practice, especially in relation to multicultural education. The ideas, theories and methods when multicultural education is planned seek support from similar concepts, such as democracy, power relations, social justice and children's agency. The learning stories of two boys with a cultural background other than Icelandic were documented in accordance with the New Zealand curriculum, "Te Whariki," illustrating the boys' communication and power relations in their preschools by foregrounding their competencies. The study supports other research showing that immigrant children struggle as they participate in play and are sometimes on the verge of being marginalized in their preschool group. The findings reveal that, in the boys' learning stories, their competence appeared clearly -- they were seen to develop their participation and sometimes their agency emerged. The power relations in their groups were not in their favour; they were marginalized in the group of children. These results suggest that, in line with Nordic policy, preschool teachers might work against the marginalization of children from multicultural backgrounds by building on children's competencies, listening to them, and relying on their ways to interact and find solutions.