Fragmented sleep is common in infancy. Although night awakening is known to decrease with age, in some infants night awakening is more persistent and continues into older ages. However, the influence of fragmented sleep on development is poorly known. In the present study, the longitudinal relationship between fragmented sleep and psychomotor development (Bayley Scales of Infant and Toddler Development [Bayley-III]; Bayley, 2009) was investigated in infants with (≥3 night awakenings, n = 81) and without fragmented sleep (≤1 night awakening, n = 70) within the CHILD-SLEEP birth cohort at 8 and 24 months of age. Differences in parent-reported (Brief Infant Sleep Questionnaire [BISQ]) sleep parameters were studied at 8, 18, and 24 months of age. Group differences in night awakening were stable across all assessment points. Infants with fragmented sleep slept less in total than infants without fragmented sleep and they did not compensate their nocturnal sleep during daytime. Additionally, infants with fragmented sleep spent more time awake at night than infants without fragmented sleep. However, psychomotor development did not differ between infants with and without fragmented sleep at 8 or 24 months of age. Our findings indicate that early onset fragmented sleep did not have a negative effect on psychomotor development within the first 2 years despite the differences in sleep length among infants with and without fragmented sleep. In the future, more specific domains of cognitive development and various factors affecting sleep fragmentation should be taken into account when studying the developmental effects of night awakening in infancy.