This study explored emotion situation knowledge of 6-8-year-old primary schoolchildren with language impairment (LI) and its relationship with their peer relations. Emotion situation knowledge contains experience-based predictions and anticipations of what will a person likely feel based on information about a particular social situation. To select study participants, the Detroit Test of Learning Aptitude (DTLA) was applied. Emotion situation knowledge was assessed with the use of vignettes, and peer relations were assessed with a peer relation checklist. Research findings indicated that: (i) children with LI had significant difficulties in understanding simple and mixed emotions as compared to their typically developing peers and (ii) emotion situation knowledge was a significant predictor for the participation of children with LI in academic activities and friendship relations. It is argued that the emotion-situated knowledge, which contains normative emotion expectations, may promote the peer relations of children with LI because it can help them respond to others in a more predictable way. Future research is needed to investigate the predictive utility of different facets of emotion knowledge on various domains of peer relations of children with LI.