The inspectorate's annual Early Years Report for 2015 found that 113,000 disadvantaged two-year-olds are not in an early years placement, despite being eligible.
Currently 15 hours of free childcare each week is available to the 40 per cent most disadvantaged two-year-olds.
But take-up of places has “fallen short of expectations,” the report said.
Wilshaw has encouraged children’s centres and health visitors to help promote take-up of early years places.
"We also need to do much more to encourage the most disadvantaged parents to take up the funded places scheme for two-year-olds, which is currently not reaching anywhere near enough children," he said.
“Local authorities can play a role here.
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