Background: The friendships of socially withdrawn/anxious children and early adolescents have been found to lack critical rewarding qualities. Observational research may help elucidate the obstacles they face in forming and maintaining high-quality friendships with sociable peers. Method: We observed the interactions of 38 socially withdrawn early adolescents with their friends and compared them to a community control group. Results: In negotiating the sharing of an object, the socially withdrawn, anxious group was more passive than controls. The socially withdrawn, anxious participants engaged less actively in a fast-paced game involving miniature cars. While completing a quiet drawing task, the socially anxious, withdrawn participants tended to refrain from comparing their work to that of their friends. In all three of our closed-field situations, the socially withdrawn, anxious participants displayed relatively neutral affect in comparison with the control group. Conclusions: These results suggest that the social withdrawal and social anxiety of children with social phobia are very evident even within the confines of their close friendships. Therefore, therapeutic interventions at the level of the dyad may be indicated. (Contains 5 tables.)