The regulator's annual report highlights concerns around funding and capacity within the sector and stresses the risk of children of less well-off parents missing out.
It notes that while the number of children aged four or under has increased by 240,000 since 2009, the number of early years places has declined by 50,000.
"The government, local authorities and providers must plan further to ensure that enough funded places are available," Ofsted's Annual Report 2015/16 states.
"They need to make sure the children of parents who cannot afford to supplement the funding do not miss out.
"This extended provision has the potential to further narrow the gap for disadvantaged children, providing there is capacity in the system to deliver it."
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