The present study observed 86 three-year-old children (M = 43.7, SD = 6.4) from 15 Swiss childcare groups, to investigate multiple individual and contextual contributions to toddlers' positive engagement with peers. The children's individual characteristics (age, sex and social skills) and childcare-related predictors (emotional and behavioural support from caregivers, and structural group features) were assessed. We employed the child-by-environment perspective and tested the hypothesis that high-quality behavioural and emotional support provided by caregivers benefits children with deficits in social abilities. Results of the multilevel structural equation modelling indicated that toddlers rated by caregivers as sociable and assertive showed more positive situation-specific peer engagement, especially with a concomitant higher quality of caregiver emotional and behavioural support. By contrast, being prosocial-cooperative was negatively associated with observed peer engagement. Thus, children's social skills were found to be the most important factor for peer engagement in childcare settings. Important suggestions for future research are made, and practical implications are discussed.