Background: Relational issues at school, including bullying, tend to be interpreted primarily in terms of the behaviour of individual students. Whilst research has broadened this focus, more needs to be understood about how the design and management of the school environment and its resources may influence peer relations. Purpose: The study sought to consider interconnections between the physical and organisational environment, resources, and social relations in school settings. Method: Ethnographic research was conducted at three schools in Sweden, consisting of 6 to 8 weeks of participant observations at each school, and interviews with school safety or health teams, 21 teachers, and 121 students from preschool class (ages 6-7) to sixth grade (ages 12-13). Field notes and interview data were analysed using an approach based on constructivist grounded theory. Findings: In-depth analysis of data identified a complex network of interconnections between the school environment, resources and peer relationships. In particular, it illuminated how competition for limited resources can influence social relations negatively. This may lead to brief minor conflicts, which, in turn, could potentially precipitate or become part of more systematic school bullying situations. Conclusions: Our findings highlight the significance of decisions about the uses of space in schools, including choices in design (e.g. of play spaces) and the distribution of resources (e.g. equipment). Deeper understanding of the interconnections between the school environment, resources and peer relations can help inform efforts to support student wellbeing.