Children, like adults, tend to prefer ingroup over outgroup individuals, but how this group bias affects children's processing of information about social groups is not well understood. In this study, 5- and 6-year-old children were assigned to artificial groups. They observed instances of ingroup and outgroup members behaving in either a positive (egalitarian) or a negative (stingy) manner. Observations of positive ingroup and negative outgroup behaviors reliably reduced children's liking of novel outgroup members, while observations of negative ingroup and positive outgroup behaviors had little effect on liking ratings. In addition, children successfully identified the more generous group only when the ingroup was egalitarian and the outgroup stingy. These data provide compelling evidence that children treat knowledge of and experiences with ingroups and outgroups differently, and thereby differently interpret identical observations of ingroup versus outgroup members.