Background The rise in peanut allergy is a source of considerable burden in the community. A growing number of preschoolchildren have been identified as peanut sensitized in the course of investigation of other allergic conditions. Although many have never knowingly ingested peanuts and their clinical reactivity is not known, it has been common practice to place these children on avoidance diets for many years. Objective To determine the utility of skin prick tests (SPT) and fluorescent-enzyme immunoassays (FEIA) for identifying either peanut allergy or tolerance in preschoolchildren with peanut sensitization. Methods Forty-nine preschoolchildren (<5 years of age) with peanut sensitization (SPT 2mm or peanut-specific IgE 0.35kU/L) but unknown clinical reactivity had graded open peanut challenges reaching a total of 11g. A positive challenge was defined as an objective IgE-mediated reaction during challenge or the 2-h observation. Results Forty-nine percent (24/49) of children had positive challenges. An SPT of >7mm on the day of challenge predicted a positive challenge with a sensitivity of 83% and a negative predictive value (NPV) of 84%. An FEIA of >2.0kU/L showed a sensitivity of 79% and an NPV of 80%. Predicting challenge outcome from a combination of SPT and FEIA (SPT >7 and/or FEIA >2 is positive) increased sensitivity to 96% and NPV to 95%. Conclusion and Clinical Relevance At least half of preschoolchildren with peanut sensitization and no antecedent history of peanut ingestion can tolerate peanuts. A SPT<7mm and FEIA<2kU/L identify children most likely to tolerate peanut, with only a 5% likelihood of failing an oral challenge. This study assists clinicians considering challenges in very young peanut-sensitized children.