Impaired empathy has been associated with aggression in children, adolescents and adults, but results have been contradictory for the preschool period. Impaired inhibitory control also increases the risk of aggression, and possibly moderates empathy-aggression associations. The current study investigated whether empathy and inhibitory control are associated with aggression in toddlerhood. Furthermore, we aimed to clarify the role of inhibitory control in empathy and aggression, specifically, whether inhibitory control moderates the association between empathy and aggression. During a laboratory visit at age 30 months (N = 103), maternal reports of physical aggression were obtained and child inhibitory control was examined using a gift delay task. Empathy was examined by obtaining behavioral observations and recording physiological responses (heart rate response and respiratory sinus arrhythmia response) to an empathy-eliciting event (i.e., simulated distress). Reduced inhibitory control was associated with more aggression. Behavioral and physiological indicators of empathy were not associated with aggression. Hierarchical regression analyses revealed an interaction effect of heart rate response to distress simulation with inhibitory control in the prediction of aggression. Post hoc analyses indicated a negative association between heart rate response and aggression when inhibitory control was high, but a positive association was found in toddlers who demonstrated low inhibitory control. These results suggest that children are less aggressive when they have both high levels of empathy and inhibitory control. Therefore, both empathy and inhibition are important targets for interventions aiming to reduce or prevent aggression at a young age.