Optimal sleeping behaviors are critical for overall development, yet some evidence suggests stress and living in a low‐income environment are associated with disruptions of sleeping behaviors early in life. In this study, we investigated the association of toddler sleeping behaviors, particularly difficulties initiating and/or maintaining sleep (DIMS), and maternal and toddler prolonged stress using hair cortisol from dyads living in low‐income homes. Hair cortisol was mainly sampled at the posterior vertex of mothers and toddlers (age 20–24 months) and analyzed with immunoassay (n = 94). Toddler DIMS were assessed at 15–19 and 27–31 months of age through mother‐rated reports using the Tayside Children's Sleep Questionnaire. We found no associations between toddler DIMS and maternal stress. Additionally, early DIMS did not predict toddler stress. However, while controlling for early DIMS and sociodemographic factors, we found that higher toddler stress predicted greater DIMS in later toddlerhood (b = −2.28, SE = 0.98, p = .02, ds = 0.64). These study findings highlight the importance of understanding the role of early life stress on later sleep patterns.