The Step by Step program was begun in 1994 as an experiment linking sound early childhood educational (ECE) practice with concepts of democracy to create classrooms in which children practice choice and learn critical thinking skills, and in which parents actively participate in their child's education. This manual extends the concepts of democracy to inclusive classrooms and is intended to help educators design and implement inclusive programs in schools and child care centers. The manual's introduction outlines the program philosophy and its principles of developmentally appropriate practice, child-centered learning, family participation, and democratic practice. This manual follows the experiences of three young children with disabilities throughout the course of the school year and is divided into three parts. Part 1, "Creating Inclusive Classrooms," describes factors contributing to the development of inclusive ECE classrooms, focusing on the vital roles that families, teachers, and advocates have played. Part 2, "Meeting Individual Needs," discusses the central role that family participation and shared decision-making play in the design and implementation of educational programs for children with disabilities. Fundamental components of meeting individual needs are discussed: individualized assessment, developing an individualized education plan (IEP), adapting the classroom environment, and planning instruction. Examples of assessment methods and IEPs are included. Part 3, "Facilitating Learning in Inclusive Classrooms," provides specific examples of curriculum adaptations and instructional strategies by developmental domains. The final chapter is a reference and resource guide for teachers. (Contains 76 references.) (KB)