Touch is an important component of early parent-child interaction and plays a critical role in the socio-emotional development of children. However, there are limited studies on touch processing amongst children in the age range from one to three years. The present study used frequency-domain diffuse optical tomography (DOT) to investigate the processing of affective and non-affective touch over left frontotemporal brain areas contralateral to the stimulated forearm in two-year-old children. Affective touch was administered by a single stroke with a soft brush over the child's right dorsal forearm at 3 cm/s, while non-affective touch was provided by multiple brush strokes at 30 cm/s. We found that in the insula, the total haemoglobin (HbT) response to slow brushing was significantly greater than the response to fast brushing (slow > fast). Additionally, a region in the postcentral gyrus, Rolandic operculum and superior temporal gyrus exhibited greater response to fast brushing than slow brushing (fast > slow). These findings confirm that an adult-like pattern of haemodynamic responses to affective and non-affective touch can be recorded in two-year-old subjects using DOT. To improve the accuracy of modelling light transport in the two-year-old subjects, we used a published age-appropriate atlas and deformed it to match the exterior shape of each subject's head. We estimated the combined scalp and skull, and grey matter (GM) optical properties by fitting simulated data to calibrated and coupling error corrected phase and amplitude measurements. By utilizing a two-compartment cerebrospinal fluid (CSF) model, the accuracy of estimation of GM optical properties and the localization of activation in the insula was improved. The techniques presented in this paper can be used to study neural development of children at different ages and illustrate that the technology is well-tolerated by most two-year-old children and not excessively sensitive to subject movement. The study points the way towards exciting possibilities in functional imaging of deeper functional areas near sulci in small children.