Peer effects, or the effect of peer skill levels on an individual's skills, are important predictors of school achievement, with recent research suggesting that they are also predictive of preschool skills. This study investigates the effect of peer levels of self-regulation on two aspects of school readiness: self-regulation and early literacy; and whether peer effects differ based on individual child skills and sex. Peer effects were assessed for 629 preschool children in 56 classrooms. Utilizing multilevel models within a structural equation modeling framework, peer self-regulation predicted self-regulation and letter word decoding growth, but not letter word knowledge. This suggests that peers can play a role in children's individual learning. Additionally, girls demonstrated higher spring self-regulation than boys. Peer effects were more predictive of spring self-regulation for children with low, rather than high, levels of fall self-regulation. These findings highlight the importance of preschool social/interactional environments. (author abstract)