In this study, the authors used a randomized controlled trial to explore the link between having positive peer relations and externalizing outcomes in 758 children followed from kindergarten to the end of 2nd grade. Children were randomly assigned to the Good Behavior Game (GBG), a universal classroom-based preventive intervention, or a control condition. Children's acceptance by peers, their number of mutual friends, and their proximity to others were assessed annually through peer ratings. Externalizing behavior was annually rated by teachers. Reductions in children's externalizing behavior and improvements in positive peer relations were found among GBG children, as compared with control-group children. Reductions in externalizing behavior appeared to be partly mediated by the improvements in peer acceptance. This mediating role of peer acceptance was found for boys only. The results suggest that positive peer relations are not just markers, but they are environmental mediators of boys' externalizing behavior development. Implications for research and prevention are discussed. (Contains 3 tables and 3 figures.)