The purpose of this study was to explore the quality of daycare by examining interactions between caregivers and young children. Across 49 Israeli daycare centers, 299 children aged 18-30 months were observed naturalistically in groups of four to eight, together with their main caregiver. Caregivers' behavior was defined in terms of mediation and was assessed using the Mediated Learning Experience Scale developed by Lidz. Mediated learning, a concept developed by Feuerstein, is a reciprocal process wherein an attentive adult sensitively uses didactic skills to mediate between a child and the world. It was hypothesized that caregivers' mediation behavior would be linked to children's affective responses. No correlation was found between mediation behavior and children's positive approaches to the caregiver. There was a tendency toward more crying episodes in daycare centers in which the caregiver mediated less. Two mediation subscales were created, one emphasizing cognitive elements of mediation and the other emotional elements. Episodes of crying were found to be significantly fewer in daycare centers in which caregivers' cognitive mediation skills were higher. Children were found to initiate fewer approaches to their main caregiver when other caregivers were present. A tendency was also found toward fewer approaches the larger the group size of the children, supporting previous findings on the importance of group size for quality of daycare.