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Research connecting children’s understanding of mental states to their peer relations at school remains scarce. Previous work by the authors demonstrated that children’s understanding of mental states in the context of a faux pas—a social blunder involving unintentional insult—is associated with concurrent peer rejection. The present report describes a longitudinal follow-up investigation of 210 children from the original sample, aged 5–6 or 8–9 years at Time 1. The results support a bidirectional model suggesting that peer rejection may impair the acquisition of faux pas understanding, and also that, among older children, difficulties in understanding faux pas predict increased peer rejection. These findings highlight the important and complex associations between social understanding and peer relations during childhood.