This paper explores the scientific evidence that has been gathered on the contributions and benefits of physical education and sport (PES) in schools for both children and for educational systems. Research evidence is presented in terms of children's development in a number of domains: physical, lifestyle, affective, social, and cognitive. The review suggests that PES have the potential to make significant and distinctive contributions to development in each of these domains. It is suggested that PES have the potential to make distinctive contributions to the development of children's fundamental movement skills and physical competences, which are necessary precursors of participation in later lifestyle and sporting physical activities. They also, when appropriately presented, can support the development of social skills and social behaviors, self-esteem and proschool attitudes, and, in certain circumstances, academic and cognitive development. The review also stresses that many of these benefits will not necessarily result from participation, per se; the effects are likely to be mediated by the nature of the interactions between students and their teachers, parents, and coaches who work with them. Contexts that emphasize positive experiences, characterized by enjoyment, diversity, and the engagement of all, and that are managed by committed and trained teachers and coaches, and supportive and informed parents, significantly influence the character of these physical activities and increase the likelihood of realizing the potential benefits of participation.