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OBJECTIVE To estimate trends of annual antipsychotic medication use by privately insured US young children (2-7 years) and to describe clinical and treatment characteristics of these children. METHOD The study population included young children from a nationwide commercial claims database (2007-2017). We estimated annual antipsychotic use by age and sex, defined as the number of children dispensed an antipsychotic per year divided by the number enrolled. We described clinical diagnoses and mental health services utilization in those with prescription antipsychotic use in 2009 and 2017. RESULTS Annual antipsychotic use in young children was 0.27% in 2007, peaked at 0.29% in 2009, and statistically significantly declined to 0.17% by 2017 (linear trend: -0.017% per year, 95% CI:-0.018 to -0.016). Antipsychotic use was higher in boys than girls. A greater proportion of antipsychotic users received a mental disorder diagnosis in 2017 (89%) than 2009 (86%, p<.01). The most common clinical diagnoses in antipsychotic users, under a hierarchical classification, were pervasive developmental disorder (2009=27%, 2017=38%, p<.01), conduct or disruptive behavior disorder (2009=15%, 2017=21%, p<.01), and ADHD (2009=24%, 2017=18%, p<.01). Among 2017 antipsychotic users, 32% had 4+ psychotherapy claims, 43% had a psychiatrist visit, and the majority used another psychotropic medication, most commonly a stimulant (boys=57%, girls=50%). CONCLUSION In privately insured young children, antipsychotic use declined from 2009 to 2017, with shifts towards indications with some supporting evidence. Nevertheless, a majority of use remains off-label and for conditions lacking effectiveness and safety data. Improving antipsychotic prescribing in young children remains a challenge.