My three-year old is just starting to develop fears. This is very new for her and for me as well. I found these great tips on how to deal with your child‘s fears in the October, 2008 issue of Parents Magazine.
According to Claire Lerner, director of parenting resources at Zero to Three, a child-development nonprofit in Washington DC, children start to develop their imaginations by the time they are two. At that age kids are struggling to distinguish between reality and fantasy so they develop fears as well.
Treat his fear seriously. Tell your child that it is okay to be scared.
Take the lead. Face the fear yourself. For example if your child is afraid of someone dressed in a costume, such as Chuck E. at Chuck E. Cheese, go and hug the character yourself.
Build him up. Talk to your child about what he can do to make him feel less frightened.
Practice, Practice, Practice. Gently persuade him to take tiny steps.