The relation of social fantasy play to several indices of social competence was examined in a sample of 91 preschoolers, aged 35 months to 69 months. Naturalistic observations of the frequency and complexity of social fantasy play during freeplay periods were collected. Competence measures included teacher ratings of social competence, popularity, social role-taking skills, and observations of social behavior. Multiple regression procedures were used to analyze the prediction of social competence from the fantasy measures, independent of age, sex, IQ, and frequency of social activity. The results indicated that the amount and complexity of fantasy play significantly predicted four of the competence measures: teacher rating of peer social skill, popularity, affective role taking, and a behavioral summary score reflecting positive social activity. Fantasy play was also found to be more positive, sustained, and group oriented than was nonfantasy play. Implications of these findings on the role of fantasy play and peer-peer activity in social-skill acquisition are discussed. Fantasy play during the preschool years has been hypothesized to exercise a leading role in the young child's growth and development (Bruner, 1972; Singer, 1973; Vygotsky, 1966). It has also been suggested that fantasy play in the context of a social interaction may lead to the development of socially relevant cognitive skills and a repertoire of competent social behaviors (Garvey, 1977; Smilansky, 1968). According to this view, participation in fantasy play with another child requires a high level of complex cognitive and social abilities. Sharing and cooperation, self-regulation of affect, and an appreciation of cognitive and behavioral role reciprocity are all important underlying skills. Social fantasy play is a unique