Research with adults has demonstrated a "black sheep effect" (BSE) whereby, relative to evaluations of normative group members, ingroup deviants are derogated more than outgroup deviants. The developmental subjective group dynamics (DSGD) model holds that the BSE should develop during middle childhood when children apply wider social norms. Three hundred and thirty-eight children who were between 5 and 12 years old judged a normative (socially desirable) and a deviant (socially undesirable) member from an ingroup or an outgroup school. Results confirmed a developmental increase in the BSE, the first time this has been demonstrated. Children's own evaluations of group members were mediated by their expectations about ingroup peers' evaluations. In line with DSGD and social domain theories, with age, children's explanations of peer evaluations for ingroup deviance focused relatively more on loyalty. Practical and theoretical implications for peer inclusion and exclusion are discussed.