Recent hits with my 4.5 year old include Comet in Moominland (by Tove Jansson), Toys Go Out (by Emily Jenkins), and the audio book of Henry and the Clubhouse (by Beverly Cleary.) Charlie and the Chocolate Factory and My Father's Dragon were also big hits.
The Children on Troublemaker Street - Astrid Lindgren
Happy Little Family - Rebecca Caudill
Did You Carry the Flag Today, Charley?- Rebecca Caudill
Betsy-Tacy - Maud Hart Lovelace (warning: baby death in one chapter)
All-of-a-Kind Family - Sydney Taylor
No Flying in the House - Betty Brock
the Catwings series - Ursula K. Le Guin
Emil in the Soup Tureen - Astrid Lindgren
Pippi Longstocking - Astrid Lindgren
As you can see, we really like Astrid Lindgren. I think DD, DS, and I would all agree that our very favorite book of hers is Ronia the Robber's Daughter. DS loved it when he was almost 4. But it has stuff in it that could be way too scary for some kids. The other books I listed are all pretty mild.