Despite the developments and examples of effective practice, it is asserted that early childhood teachers encounter difficulties while utilizing formative assessment in their classrooms and the debate about how to achieve this continues. It is widely acknowledged that preservice teachers need research-based professional support to have sufficient competence in assessment when they graduate. In this study, collaborative action research for building preservice early childhood teachers’ formative assessment capabilities was examined. This qualitative study took place over one academic year. Observation notes, reflective journals, and interviews were used to gather data about preservice teachers’ experiences of formative assessment. The findings suggested that action research could be an important underpinning professional learning approach to support formative assessment practices in initial early childhood teacher education. More widely, action research is critically recommended in teacher learning and practice that involves systematic reflection, data-driven decision-making, and modification of practices.