Using the approach of Fradkin and Vasiliev (1987), an action is constructed in 2+1 spacetime dimensions describing interacting massless fields of all integer and half-integer spins s>or=3/2. The action is associated with an infinite-dimensional superalgebra, denoted shs(1, 2)(+)shs(1,2). Truncation to the spin 3/2-spin 2 sector gives the (1,1) type anti-de Sitter (AdS) supergravity theory corresponding to osp(1,2; R)(+)osp(1,2; R). Various properties of the D=3 higher-spin theory, and its relevance to the higher-spin problem in four dimensions, are discussed.