Objective: To examine whether kindergarten children's genetic liability to physically aggress moderates the contribution of friends' aggression to their aggressive behaviors. Method: Teacher and peer reports of aggression were available for 359 6-year-old twin pairs (145 MZ, 212 DZ) as well as teacher and peer reports of aggression of the two best friends of each twin. Children's genetic risk for aggression was based on their cotwin's aggression status and the pair's zygosity. Results: Children's aggression was highly heritable. Unique environment accounted for most of the variance in friends' aggression, although there was also a small genetic contribution (15%). Both genetic liability to aggression and having aggressive friends predicted twins' aggression. However, the contribution of aggressive friends to children's aggression was strongest among genetically vulnerable children. This result was similar for boys and girls, despite sex differences in both aggression and the level of aggression of friends. Conclusions: Affiliation with aggressive friends at school entry is a significant environmental risk factor for aggression, especially for children genetically at risk for aggressive behaviors. Developmental models of aggression need to take into account both genetic liability and environmental factors in multiple settings, such as the peer context, to more precisely describe and understand the various developmental pathways to aggression. The implications for early prevention programs are discussed. (Contains 2 tables and 1 figure.)