The goal of the present study was to explore the relations between social avoidance, peer preference, loneliness, and social sensitivity among urban Chinese children. Participants were 951 children attending primary and middle schools from grade 3 to grade 7. Cross-sectional data were collected using self-report assessments and peer nominations. Results indicated that: (1) social avoidance positively predicted loneliness; (2) peer preference partially mediated the relation between social avoidance and loneliness; (3) social sensitivity moderated the mediating path through peer preference. The findings not only explain the mental health problems of avoidant children from the standpoint of social sensitivity and peer preference, but also have illuminating implications for guiding individual adaptation and mental health intervention.