This Annotation highlights recent research on the role of peer group and friendship factors in the development of psychopathology in childhood and adolescence. Several processes are considered. including peer rejection (e.g., exclusion and victimization), social withdrawal and avoidance of peer interaction, and the socialization of deviant behavior and internalizing problems. The mediating influences of several proximal components are examined, including cognitive-perceptual factors and emotion regulation. In addition, the moderating influences of close friendship, age, gender, ethnicity, and group norms are considered. Several promising avenues for future directions in research are highlighted, including the examination of heterogeneity in developmental processes, further investigation of gender-based norms, and the application of multi-level modeling techniques and gene-environment process models.