The ability to argue and to create alliances with peers are important social competencies for all children, including those who have speech, language and communication needs. In this study, we investigated the management of arguments and alliances by a group of 5-year-old male friends, one of whom has a persisting speech difficulty (PSD). Twelve argument episodes that arose naturally during video-recorded free play at school were analysed, using Conversation Analysis. Overall the data show that the child with PSD was just as likely as one of his friends to be included in, or excluded from, play alliances. Detailed analysis of two episodes reveals that the child with PSD competently used a range of linguistic devices in and around arguments and that his speech difficulties apparently did not impact on his ability to form alliances. This study highlights the need for those of us who work with children to take account of peer interactions and to consider the linguistic strategies that children employ when participating in peer talk and play: the social world in which inclusion and exclusion are accomplished. The study also illustrates the value of qualitative micro-interactional analysis as a research tool for investigating social inclusion and exclusion. (Contains 1 figure and 2 tables.)