The assessments will feed into the work now done when children start school, with a view to identifying and tackling problems as early as possible.
Every registered early years centre will have a special educational needs co-ordinator, backed by a network of up to 850 area specialists by 2004.
The government is allocating £25m to the scheme, which will include £11m over three years to help local authorities improve their early years services.
Money for training
It is also sponsoring a working group to develop guidance on how to identify special educational needs in the very young - children under the age of two.
The scheme will include £11m to train early years and childcare special educational needs (SEN) workers and £3m to set up a regional network of experts to work with local authorities.
The aim is to contribute to the "baseline assessment" carried out in schools.
Introduced in 1998, this is now an important element in the early identification of problems in all England's first schools.
Choice
The Department for Education expects early years and childcare development partnerships - the organisations responsible locally for providing early education and childcare - to have one area co-ordinator for every 20 private and voluntary centres by 2004.
The Education Secretary, David Blunkett, announced the funding to coincide with the second reading of the Special Educational Needs and Disability Bill in the Commons.
The bill is intended to make it easier for learners with special needs to get a place in a mainstream school, college or university if they want one.
A Conservative amendment opposing the second reading complained that the bill did not "explicitly give priority to the special educational needs of the child and contains no mechanism for safeguarding a viable choice" of school for parents.
Mr Blunkett told MPs the bill would strengthen the right to a mainstream place for children with special educational needs.
"It is important that we change attitudes," he said.
"We cannot simply bring about a step change in equality by legislation. In the end it will be seeing ways around a problem rather than the problem."