Developmental intergroup theory specifies the mechanisms and rules that govern the processes by which children single out groups as targets of stereotyping and prejudice, and by which children learn and construct both the characteristics (i.e., stereotypes) and affective responses (i.e., prejudices) that are associated with these groups in their culture. Specifically, we argue that children have a drive to understand their world, and that this drive is manifested in their tendency to classify natural and non-natural stimuli into categories, and to search the environment for cues about which of the great number of potential bases for categorization are important. The first step in the process of stereotype and prejudice formation is, therefore, the establishment of the psychological salience of some particular set of dimensions. Four factors are hypothesized to affect the establishment of the psychological salience of person attributes: (1) perceptual discriminability of social groups, (2) proportional group size, (3) explicit labeling and use of social groups, and (4) implicit use of social groups. We argue that person characteristics that are perceptually discriminable are more likely than other characteristics to become the basis of stereotyping, but that perceptual discriminability alone is insufficient to trigger psychological salience. Thus, for example, young children's ability to detect race or gender does not mean that these distinctions will inevitably become the bases of stereotypes and prejudice. Instead, for perceptually salient groups to become psychologically salient, one or more additional circumstances must hold, including being characterized by minority status, by adults' use of different labels for different groups, by adults using group divisions functionally, or by segregation. After a particular characteristic that may be used to differentiate among individuals becomes salient, we propose that children who have the ability to sort consistently will then categorize newly encountered individuals along this dimension. The act of categorization then triggers the process of social stereotyping and prejudice formation. Four factors are hypothesized to have an impact on the processes of forming stereotypes and prejudice. These include: (1) essentialism, (2) ingroup bias, (3) explicit attributions to social groups, and (4) group-attribute covariation. As noted throughout this chapter, there has been relatively little developmental work on many of the processes outlined here. Although findings from our own programs of research are consistent with the role of factors we have identified in the theory (e.g., the role of minority status, segregation, labeling and functional use of groups have all been shown to influence children's evaluations and beliefs about social groups), far more extensive research is needed. In addition to testing the reliability and generalizability of past findings to other samples, other research laboratories, and other experimentally manipulated groups, future work must move these theoretical models into the laboratory of the real world. If the tenets of developmental intergroup theory are correct, there would be many implications for social, educational, and legal policies related to social groups. We noted, for example, ways in which race and gender are made psychologically salient (e.g., the use of labels; segregated conditions). Importantly, factors such as these are largely under societal control. That is, institutions and individuals can choose to routinely label and use some particular category within children's environments or not. It is a violation of federal law, for example, for public school teachers to ask the children in their classrooms to line up at the door by race. In contrast, no federal or state law prohibits teachers from organizing their classrooms by sex. Should such laws be enacted? There can also be social controls on various forms of social segregation. Is it within individual children's rights to affiliate only with same-sex or same-race individuals? Is it acceptable for children and adolescents to exclude peers from their games, play, study groups, or other cliques on the basis of gender, race, age, or ethnicity? Finally, social institutions such as schools offer potential opportunities for intervention programs. What, if any, programs should be offered or required? Should curricula explicitly discuss social stereotyping and prejudice? Should children be taught negative information about people with whom they share some characteristic to reduce ingroup favoritism? Our hope is that developmental intergroup theory will ultimately prove valuable not only for understanding the development of social stereotypes and prejudices in children, but also for guiding social interventions that can ultimately prevent the development of stereotypes and prejudices in individuals and society.