The nutrition of preschool children is of considerable interest not only because of concern over their immediate welfare, but also because their nutrition in this formative stage of life is widely perceived to have substantial persistent impact on their physical and mental development and on their health status as adults. Children’s physical and mental development shapes their later lives by affecting their schooling success and post-schooling productivity. Improving the nutritional status of currently malnourished preschoolers may, therefore, have important payoffs over the long term. Within rural Mexico, stunting, or short height relative to standards established for healthy populations, is the major form of protein-energy malnutrition (PEM). Low weight for height, or wasting, is much less of a problem. But stunting is symptomatic of longer-term effects of early childhood malnutrition. One of the major components of the PROGRESA program has been directed toward improving the nutritional status of children in poor rural communities in Mexico. Cross-sectional comparisons of height for children who received PROGRESA treatment versus others who were in PROGRESA-eligible households but who did not receive treatment suggest no positive effect of PROGRESA, either on average child height or on the proportion of children who are stunted, i.e., more than two standard deviations below recognized norms. But these comparisons may be misleading because of the failure to control for unobserved child, parental and household, and market and community characteristics that may be correlated with children receiving the PROGRESA treatment, or because of the failure to control for systematic initial differences. For example, on average, the children in the control sample tended to have better anthropometric status than children in the treatment sample. The preferred estimates used in this study control for these factors. PROGRESA treatment is represented by those who reportedly received nutritional supplements in the treatment group (less than 60 percent of children in the treatment group) for children in the critical age range of 12 to 36 months. These estimates find significant effects of receiving PROGRESA treatment in increasing child growth and reducing the probability of child stunting. These estimates imply an increase of about one-sixth in mean growth per year for these children, and perhaps somewhat greater for children from poorer households and poorer communities but whose household heads are more educated. This is a potentially important effect: under the assumptions that (1) there is strong persistence of changes in small children’s anthropometric development so that the percentage changes for adults equal those (are half of those) that we estimate for children and (2) that adult anthropometric-earnings relations from elsewhere in Latin America apply to the labor markets in which these children will be working as adults, the impact from this effect alone would be a 2.9 percent (1.4 percent) increase in lifetime earnings. In addition, there are likely to be other effects through increased cognitive development, increased schooling, and lowered age of completing given levels of schooling through starting when younger and passing successfully grades at a higher rate. While these estimates remain fairly speculative, they suggest that PROGRESA may have substantial effects on lifetime productivity and earnings of preschool children in poor households.