The council's education committee heard last week that present provision was "unsustainable". There are 244 early education centres in Highland, 60 more than the number of primary schools.
The rapid development of early years services across the Highlands has been seen as a success story, but officials say they have been left with too many facilities for a declining under-five population.
Councillors also highlighted the problems faced by parents in rural areas who have difficulties with transport and warned problems would increase as facilities were rationalised.
Bruce Robertson, director of education, said: "The provision that developed doesn't always meet the needs expressed by families. We are facing demographic and financial challenges. People now want wraparound care, and indeed one parent came to one of our schools asking if childcare was available from 7am to 6pm. These demands are coming from rural as well as urban areas."
A report presented to the committee forecast that declining numbers of children, down from 13,082 in 2006 to 11,638 in 2016, would see the level of grant fall by some pound;1.08 million.
Authorities are also coming under pressure from the Care Commission over the standard of buildings used in early years education. The workforce will also have to meet new standards in terms of formal qualifications. "This will have a significant impact in Highland, where a lot of the provision is delivered by the voluntary sector," Mr Robertson said.
In future, childcare, education and out-of-school care are to be centred on Highland's primary schools. This is forecast to realise savings of Pounds 100,000 over the next three financial years.
Mr Robertson said: "Parents object to having to move their children from childcare to nursery to childminding in different places. But a local authority-based approach on its own won't work and we need to work with voluntary groups." He added: "There will be fewer facilities in the Highlands, because we are living beyond our means. We have to have a better quality service that meets people's needs."
Andy Anderson, Highland's education chairman, said: "We are carrying out a mapping exercise at the moment to find out where nursery and childcare provision exists in relation to our primary schools. Then we will be looking at rationalisation, in partnership with the voluntary and private sectors."