The relationships of deviant talk and role taking during peer interaction, association with deviant peers, and growth in overt and covert conduct problems during kindergarten and first grade were examined in a community sample of 267 boys and girls. At entry to kindergarten, high levels of overt and covert conduct problems predicted association with deviant peers, and deviant peer association predicted deviant talk and role taking during peer interaction during kindergarten. Association with deviant peers, and deviant talk and role taking predicted growth in overt and covert conduct problems on the playground, in the classroom, and at home during kindergarten and first grade. Peer processes associated with growth in conduct problems that escalate rapidly during late childhood and adolescence appear to occur in earlier childhood. These peer processes may play a central role in the evolution of conduct problems to include covert as well as overt forms.