A consistent finding in the literature is that children who demonstrate lower levels of social functioning (i.e., exhibit high levels of externalising and internalising problems and low levels of socially competent behaviour) have problems interpreting social cues and enacting appropriate behavioural responses in social situations (that is, they have poor social information processing (SIP) skills). Another consistent finding is that children who demonstrate lower levels of social functioning have problems regulating behaviour and/or emotions (that is, they have poor self-regulation skills). The research questions in this study explore two related issues: whether these associations can explain sex differences in social functioning (with girls consistently exhibiting higher levels of social competence and lower levels of externalising problems than boys) and whether an intervention targeting SIP and self-regulation skills can lead to improvements in social functioning. The study forms one component of a larger developmental prevention project (the Pathways to Prevention Project) which involves the provision of an integrated set of intervention strategies to children attending preschools in a highly disadvantaged Brisbane suburb. It also involves programs with their families, their schools and relevant ethnic communities. This study relates to a sub-sample of 308 children who participated solely in the social skills program. Children from two preschools received the program (N=174) and were compared with children from two other preschools who did not receive the program (N=134). The research questions were addressed using a repeated measures design, with data being collected from all intervention and comparison children pre- and post-intervention (that is, at the beginning and end of the school year) and at a one year follow-up at the end of Grade 1. The study is unique as it involves Australian children from a diverse range of cultural backgrounds, many of whom who are non-English speaking. Few studies have involved such diverse samples and none have been implemented in an Australian context. The first two research questions seek to confirm findings from prior studies, examining whether females exhibit higher levels of social functioning than males and whether there is a significant relationship between social functioning and SIP and self-regulation skills. The third research question significantly extends prior findings by examining whether there are sex differences in SIP and self-regulation skills and whether these can account for sex differences in social functioning. This issue has been largely overlooked in the literature. The fourth research question examines whether a social skills intervention designed to improve preschool children's SIP and self-regulatory skills can lead to improvements in these skills and increase levels of social functioning. The fifth research question examines the relative effect of the intervention for boys and girls. Using pre-intervention data, the study confirmed prior research, finding significant sex differences in social functioning with girls exhibiting higher levels of social competence and lower levels of externalising problems. A significant relationship was also found between measures of SIP, self-regulation skills and social functioning. A significant sex difference was found in SIP and self-regulation skills, with girls performing better than boys on these measures. After adjusting for children's scores on the SIP measure, sex differences in social competence were no longer significant. Sex differences in externalising problems remained significant but were markedly reduced. A similar pattern of findings was observed when adjusting for self-regulation skills. These findings represent a major contribution to the understanding of sex differences in social functioning. In comparison to non-participants, participants in the social skills program demonstrated significant improvements in SIP, self-regulation skills and social competence which were sustained 12 months after the completion of the intervention. In general, program participation was not found to be associated with changes in children's levels of externalising and internalising behaviour problems, although there were strong and significant reductions in externalising behaviour problems for disruptive children who were consistently engaged with the program. Program effects were greatest where it was consistently reinforced by teachers. No significant sex differences in program effects were found. Implications for future policy are that child-focused programs designed to increase school readiness and levels of social competence should include SIP and self-regulation components. More intensive programs may be required for long term improvements in behaviour problems. In terms of future practice, it is concluded that the implementation and evaluation of programs for young disadvantaged children from a range of multi-cultural backgrounds must limit English language requirements to increase program engagement, and encourage parental involvement using strategies such as parent training groups that do not demand high levels of parental literacy. Teacher involvement also needs to be maximised either through the provision of teacher training or through intensive mentoring.