The results of a long-term study funded by the government also revealed that children who are looked after by an informal carer, such as a relative, have better language development by their fourth birthday.
Research conducted as part of the ongoing Study of Early Education and Development (SEED) tracked 3,930 children and their families to discover how different forms of early childhood education and care (ECEC) affect cognitive and socio-emotional development.
The latest publication revealed children who spent more hours in formal group settings, such as day nurseries, nursery classes or schools and playgroups, showed better cognitive non-verbal reasoning ability by the age of four.
This meant they were more proficient at problem solving and analysing information when tested through non-verbal means, such as using pictures and diagrams.
The study also showed they were better at empathising with others, socialising, managing their own feelings and behaviours, and had fewer problems with their peers.
The report emphasised that positive impacts were greater among groups of disadvantaged children, and noted a relationship between better quality care leading to better outcomes.
It said: "This indicates the value of high-quality ECEC provision, and suggests that efforts to further improve the quality of provision may be expected to lead to further improved child outcomes."
The study also revealed that children cared for by individuals in domestic childcare settings, such as a childminder, had fewer emotional difficulties including fears and worries. It found children who were looked after by family or friends had developed better language skills by the age of four.
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However, the research also revealed that a small number of children who spent more than 35 hours a week in formal group settings could be more likely to develop behavioural problems.
Pre-school Learning Alliance chief executive Neil Leitch said the results indicated the government should focus on early years policies that ensure high-quality practitioners are at the forefront of provision.
"In recent years the debate around what the early years should look like seems to have shifted," he said.
"We've moved away from a child-focused approach to one more concerned with practitioners' qualifications and children's school readiness," he said.
"It's pretty clear: children - especially those from the most disadvantaged backgrounds - benefit from high-quality practitioners, not necessarily those with the highest qualifications, and their childcare should address their broader needs as children, rather than fixate on literacy and numeracy."
Research director of the National Centre for Social Research Svetlana Speight said: "With the continuing increase in government investment in early years, it is encouraging to see a range of positive outcomes for children as measured just before they started school in reception year.
The SEED research, commissioned by the Department for Education in 2012, is conducted by a consortium of organisations including University of Oxford, Action for Children, Frontier Economics and the National Centre for Social Research.