Self-efficacy has been associated with benefits to everyday life such as resilience to stress and adversity, healthy behaviours, improved performance, and academic achievement. Research into self-efficacy development is scarce in early childhood, yet self-efficacy is associated with numerous skills and competencies taught in the early years of school. A mixed-method approach was employed to explore early childhood teachers' understanding of how self-efficacy developed in children. The study focussed on teachers of children in Kindergarten to Year 2 (K-2) in primary schools in Western Australia and was conducted in two phases. Initially, an online survey, answered by 74 K-2 teachers, was implemented to gather early childhood teachers' understandings of the self-efficacy construct. The second phase sought additional description of survey findings through semi-structured interviews with 10 early childhood teachers. Findings identified that early childhood teachers describe the sources of self-efficacy differently to research with older children and adults. In older children, mastery is considered a primary source of self-efficacy, as mastery experiences provide children with concrete evidence of their capabilities and competence. This study identified that young children, who have not had time or opportunity to master complex cognitive tasks, rely on self-efficacy sources that are more in line with their developmental levels, including their physiological and emotional states. This finding has major implications for how teachers, school leaders, curriculum writers and policy makers think about the self-efficacy development of children in early childhood settings.