‘Circle of Friends’ (CoF) was originally developed in Canada as a social tool for including vulnerable children or adults within their mainstream communities (Pearpoint, Forest & Snow, 1992). Within the UK context, CoF has been increasingly introduced by schools as a strategy for including pupils, with a range of challenging needs or behaviours, who have become rejected by or isolated from their peers.The initial set-up meeting plays a critical role in establishing CoF interventions. The present paper focuses on a review of relevant qualitative and quantitative literature and a Grounded Theory analysis of a research study undertaken by the lead author. The design involved interviews with 25 facilitators of CoF within mainstream schools in a large shire county and an outer London suburb. The children participating in the CoF groups ranged in age from seven to twelve years.The psycho-social theories emerging from the analysis contribute to our understanding of the part played by the set-up meeting and ‘perspective taking’ in the initial stages of the change process.At its highest level of conceptualisation the final theory describes how a ‘Circle of Friends’ can facilitate the movement of a pupil from a ‘closed’ or isolated social field to more ‘open’, peer based, social relationships. Hypotheses for subsequent social action and future research are discussed.