This study examined whether children's observed individual engagement with teachers, peers, and tasks related to their school readiness after controlling for observed preschool classroom quality and children's baseline skills. The sample included 211 predominately low‐income, racially/ethnically diverse 4‐year‐old children in 49 preschool classrooms in one medium‐sized U.S. city. Results indicated that children's positive engagement with (a) teachers related to improved literacy skills; (b) peers related to improved language and self‐regulatory skills; and (c) tasks related to closer relationships with teachers. Children's negative engagement was associated with lower language, literacy, and self‐regulatory skills, and more conflict and closeness with teachers. Effect sizes were small to medium in magnitude, and some expected relations between positive engagement and school readiness were not found.