This literature review considers research dealing with social skills instruction for handicapped preschool children in a mainstreamed or integrated setting. It offers a literature-based rationale for preschool mainstreaming, notes the fundamental objectives of preschool mainstreaming that relate to the process of socialization, and addresses the need for organization and structure in program design. Specific components necessary to enhance the social behavior and social skills development of handicapped preschool children are outlined, calling for a daily schedule which emphasizes direct social skills instruction and careful organization of environmental variables. The review also considers: (1) types of activities most conducive to positive social interactions between handicapped and nonhandicapped youngsters; (2) efficacy of activities with nonhandicapped children in preparation for the arrival of a handicapped child; (3) physical arrangement of the classroom; (4) grouping of children; (5) teacher influence; (6) use of teacher-mediated intervention; (7) peer-mediated intervention; and (8) research needs in this area. (49 references) (JDD)