Moral reasoning in values education can promote a democratic way of life. It involves addressing behaviour expectations in responses to violence or bullying. There is increasing interest in how children make moral judgments about social inclusion within diverse cultural settings. Critical research highlights the relationship between epistemic cognition (views about the nature of knowledge and knowing) and reasoning. In this paper, we argue that this relationship is likely to be important in reasoning about moral values for inclusion in culturally diverse schools. However, we know little about how children in diverse educational settings reason about and enact school values for inclusion. Our study addresses this gap by examining primary school children’s epistemic reasoning about the social inclusion of peers with a focus on justifications for inclusion/exclusion of aggressive peers. Twenty‐six children (10–11 years old) from one culturally diverse school community in Australia were asked to illustrate (drawings) and reflect on (15–20 minute interviews) a conflict situation involving exclusion from play. The findings showed that most children reasoned about including/excluding others based on a ‘one right answer’ pattern which reflected an explicit focus on following the school rules. Fewer children moved ‘beyond right answers’ to show transition towards perceiving multiple perspectives in their reasoning about inclusion/exclusion. Implications for values education are discussed.