In the 1960s, the provision of public childcare became an important mean to facilitate the entrance of Swedish women into the labour market at a period of economic growth and labour shortage. Since then, preschools have been an important part of Swedish welfare and labour market policies. Today a majority, (77% in 2001) of all children between 1 and 5 years old go to municipal preschools. The preschool therefore constitutes an important site of upbringing and educating young children, and is also an important arena of educational work. In the last ten years Swedish preschool education has been affected by a number of changes. Above all, state retrenchment and budget cuts have meant that the resources spent per child decreased by approximately 20% in the 1990s. The number of children per preschool teacher increased correspondingly. Also, the introduction of the first preschool curriculum in 1994 led to concerns about increased stress regarding cognitive development and school preparation in preschool education. However, there has been little research on the effects of such changes either on preschool education or on preschool teachers' work. The aim of the paper is thus to discuss and analyse the practices of Swedish preschool teachers and the distribution of power relations and identities within preschools against such a background. It is based on observations of preschool teachers' practice in three preschools in the north of Sweden, situated in three different local contexts: multicultural urban environment, rural area and a affluent urban environment. The research so far suggests that the backgrounds, experiences and needs brought into preschool by teachers, children and their parents vary according to different local contexts. Theoretically, the paper departures from the school of cultural-historical theory of activity developed by among others L. S. Vygotsky, A. R. Luria and A. N. Leont´ev, and thereby uses the model of activity systems developed by Yrjö Engeström. Data is further interpreted using concepts elaborated by Basil Bernstein, in particular the concepts classification and framing.The paper focuses on interactions between teachers and children, what preschool teachers say and do in their everyday practices, and how this corresponds to dominant official discourses of how to foster the democratic child, as expressed in the Swedish national curriculum. It is suggested that interaction varies between the three different preschools and shapes different identities, both among teachers and children, and also with regard to the distribution of different forms of power. The paper closes with a discussion about whether changed practices are related to changes in discourse, rather than structural changes.