This study investigates contributions of the preschool classroom interpersonal environment to students' social competence in 1st grade. Participants were 862 ethnically/racially diverse children who attended public preschool classrooms serving low-income families. Systematic observations of 60 classrooms occurred across the preschool year and quantified teacher and student behaviors. Preschool and 1st-grade teachers provided reports of children's social behavior. First-grade teachers also assessed children's problem behaviors. Multilevel analyses indicated that at the end of 1st grade, students who experienced preschool settings with teachers who displayed more approving behavior, less disapproving behavior, and more positive emotional tone showed significant gains in positive social behavior and lower rates of problem behavior, even after students' social skills at preschool entry were controlled. Greater gains in positive social behavior and fewer problem behaviors in 1st grade were also predicted by immersion in preschool classrooms that had more positive and cooperative interactions among peers. Practice or Policy: Universal preschool is a policy under consideration nationally and locally, with social competence often listed as an important goal. This study indicates that even in the absence of a particular social-emotional curriculum, preschool teachers' behaviors and interactions among their students may have lasting implications for children's social development. (author abstract)