Based in a transactional framework in which children's own characteristics and the social environment influence each other to produce individual differences in social adjustment, we investigated relationships between children's peer problems and their temperamental characteristics, using a longitudinal and genetically informed study of 939 pairs of Israeli twins followed from early to middle childhood (ages 3, 5, and 6.5). Peer problems were moderately stable within children over time, such that children who appeared to have more peer problems at age 3 tended to have also more peer problems at age 6.5. Children's temperament accounted for 10%-22% of the variance in their peer problems measured at the same age and for 2%-7% of the variance longitudinally. It is important that genetic factors accounted for the association between temperament and peer problems and were in line with a gene-environment correlation process, providing support for the proposal that biologically predisposed characteristics, particularly negative emotionality and sociability, have an influence on children's early experiences of peer problems. The results highlight the need for early and continuous interventions that are specifically tailored to address the interpersonal difficulties of children with particular temperamental profiles.