Background There is a widespread consensus in the literature that children who have psychological problems are more likely than other children to be excluded or rejected by their peers. The existence of this phenomenon has been established, primarily with the use of research on their sociometric status within groups of peers. Much less research has been performed on the way in which children develop attitudes and behavioural intentions towards peers with problems.Aims The primary aim of this article is to introduce readers to research on children's understanding of the nature of common childhood psychological problems, with a view to exploring the factors that might contribute to the development of negative attitudes and behaviour.Method Relevant publications were identified through searches of electronic databases and articles in print.Results From the early years of primary school, children are able to identify peers whose behaviour deviates from the norm and to suggest causes for the behaviour of peers with psychological problems. Furthermore, their beliefs about peers' personal responsibility for these problems appear to be a significant determinant of attitudes and behavioural intentions. The article identifies the need for more research on the role of factors such as gender and personal contact in determining children's understanding of and attitudes towards, peers with psychological problems. In addition, the article calls for more research on mental health education programmes and the extension of these programmes to younger children, given the fact that even young primary school children appear to have beliefs about the causes of psychological problems and negative attitudes to peers who display such problems.Conclusions Research on children's understanding of mental health can make an important contribution to our understanding of why children with problems are so much more likely to be excluded from their peer group.