Environment, physical activity (PA) and motor development are tightly interwoven during childhood. We examined the associations of environmental factors with motor competence (MC) in children. Children (N = 945, 50.1% boys, age = 3–7 years, mean = 5.4 years) from 37 childcare centres in the Southern (n = 17), Central (n = 13) and Northern Finland (n = 7) participated. The environmental factors comprised the geographical location (Southern, Central and Northern Finland) and residential density (metropolitan area, city, rural area and countryside) of the childcare centres’ based on postal codes and the national population density registry. MC was measured using the Test of Gross Motor Development (TGMD)-3, as well as by quantifying time spent outdoors and participation in organised sports via parental questionnaire. It was found that children from the countryside had better MC and spent most time outdoors, while children from the metropolitan area most frequently engaged in organised sports. Gender comparisons revealed that girls outperformed boys in locomotor skills, while boys were better in object control skills, had higher TGMD-3 score and spent more time outdoors. Time spent outdoors and participation in organised sports were associated positively with MC, but not in children from the countryside. In conclusion, higher population density was associated with lower MC and less time spent outdoors. The findings suggest that versatile outdoor environments may support motor development through PA.