This study investigated preschoolers' understanding of three parental emotions: happiness, sadness, and anger. The study also examined relationships of these understandings to preschoolers' emotional competence. Subjects, 70 children with a mean age of 55 months, were presented with a dollhouse and were encouraged to imagine that the dollhouse family was their own family. Using the context of pretend play, experimenters posed questions to the children (e.g. "Show me how you know that Daddy is angry...what happens?" or "Can you make Mommy feel better?"). By manipulating the dolls, children responded to the questions. All verbalizations were transcribed, and narrative records of nonverbal behaviors were coded from videotape. Teachers rated children on empathy and positive peer relations, peer competence, and aggression. Children also participated in a play session in which a familiar adult displayed emotions (sadness, anger, and pain). Children's behavioral reactions and facial expressiveness were coded. Results found that children demonstrated coherent understandings that different parental emotions have differing causes and child responses, that children could suggest specific strategies to change parents' emotions. Children's beliefs about their parents' expressive patterns, and about their own reactions and interventions in response, were related to their emotional competence in the two settings. (MM)