This paper focuses on possible relations between early peer skills and developing cognitive abilities. One promising area for discovering relations between cognitive development and peer interaction appears to be related to the young child's developing ability to differentiate self from other, that is, decentration. Decentration is typically indexed by the child's representation of the agency of self versus others in pretense play, and it shows regular developments over the second year. It seems conceptually appealing to think that this growing differentiation of self and other might go hand in hand with growing skills in peer interaction over the second year. A second possible relationship between early peer developments and decentration comes from toddlers' shift from proximal, object-supported peer contacts, to distal, symbolically-mediated contacts. Third, some investigators have recently begun to study the toddler's and preschooler's understanding of rules that regulate social interaction, particularly rules regulating object exchange. Findings of preliminary observations focusing on the development of such rules among toddlers suggest that 18- and 24-month-old children begin to differentiate rules that focus on their own rights as a possessor from rules that also take into account another child's status or rights as a possessor; however, toddlers in the second half of their second year clearly do not operate altogether under shared rules. (RH)