Does children's bias toward their own groups reflect egocentrism or social understanding? After being categorized as belonging to 1 of 2 fictitious groups, 157 six- to ten-year-olds evaluated group members and expressed preferences among neutral items. Children who expected the in-group to share their item preferences (egocentric social projection) showed intergroup bias. However, most bias was expressed by children who expected their in-group to share, but the out-group to oppose, their own evaluations of members. These oppositional expectations were associated with better social perspective taking, and better understanding that groups expect loyalty from their members. Consistent with the developmental model of subjective group dynamics (D. Abrams, A. Rutland, J. Pelletier, & J. M. Ferrell, 2009), social understanding, rather than egocentrism, provides a more parsimonious explanation of children's intergroup bias.