The narrative performances of Navajo children were examined to determine the ways in which the skills of competently structuring a narrative are informally learned within the peer group. Ten- and eleven-year-old Navajo children, living near Window Rock, Arizona, were evaluated in telling stories about the most traditional figures of Navajo belief, skinwalkers (the Navajo equivalents of werewolves). The stories were collected from the children as they gathered in self-selected groups within the classroom. The narratives were told in English, the first language of most of the children. For the Navajo child, a peer group is not merely a collection of friends, but of family members. Six elements in the structure of a well-formed narrative, suggested by William Labov (1972), provide an organizational framework for the analysis. These elements are: abstract, orientation, complicating action, evaluation, result or resolution, and coda. Examples of the story-telling of specific children are cited. It is concluded that competence in ordering and structuring a narrative remains intimately connected with the interactions of a narrator's peers, for it is through peer group interaction that a child learns what is acceptable, what is exciting and involving, and what is culturally meaningful. The narrative competence in structuring the story cannot be measured simply on a scale of cognitive abilities and age-graded achievements. (SW)