A developmental cascade model linking symptoms of externalizing and internalizing psychopathology through three indices of peer relational difficulty (peer rejection, peer victimization, friendedness) was tested in a general population sample of 653 children followed annually from kindergarten to fourth grade. Rejection and victimization linked kindergarten externalizing problems with fourth-grade internalizing problems. Transactional links between rejection and victimization were found. In addition, peer rejection added to the development of externalizing problems. Friendedness did not add to the development of externalizing or internalizing problems. Cascade paths were similar for boys and girls. Over the period of kindergarten to fourth grade, psychopathology and peer relations become entangled, and the dynamic interplay between multiple manifestations of poor peer relations ultimately adds to the development of both externalizing and internalizing problems and their cross-time relation. Implications for research and prevention are discussed. © Cambridge University Press 2010.