Teachers from fourteen classrooms were randomly assigned to an adaptation of Incredible Years (IY) teacher training or to teacher training-as-usual. Observations were made of the behavior of 136 target preschool boys and girls nominated by teachers as having many or few conduct problems. Peer and teacher behavior were observed at baseline and post training. IY training resulted in increases in teachers' positive and reductions in teachers' negative behavior relative to training as usual, in decreased peer negative behavior toward target children, and in decreased negative behavior of target children high on conduct problems. The impact of IY training on the behavior of target children was mediated by changes in peers' behavior with no direct effects of teacher behavior and differential effects for high and low conduct problem children. Teacher training focused on altering the whole classroom environment may be an effective strategy, even for children with significant conduct problems.