Fun topic! My DS enjoyed listening to the old classic fairy tales and myths at that age (but if your DD is sensitive, maybe the more modern versions would be better). I second the Ramona series, especially the first couple where she was young. Also the other Beverly Cleary books - Henry and Mouse and the Motorcycle (actually I didn't like the Mouse books, but many kids do).

We loved Frog and Toad too, and DS started getting into Magic Treehouse in his late 3's. One caveat with those - read a couple first to be sure that you want to read them over and over to your kiddo. I got so sick of them. I told DS we would only get new ones if he read them on his own. I'm mean that way.