It is proposed that exclusion from peer interactions compromises development primarily through two defensive pathways involving aggression and social-withdrawal. Hostile attributional biases and anger expectations enable aggressive children to maintain positive self-views in the face of rejection, but place them at risk for continued problem behaviors. Although withdrawal from peer interactions helps nonaggressive children reduce rejection distress, lack of peer contact increases the risk of continued social problems. That is, social-cognitive biases together with peer feedback help account for the diverging developmental pathways and outcomes of aggressive vs. withdrawn rejected children. The implications of a developmental approach are discussed in terms of current debates about the effects and functions of rejection.