Research Findings: A theory-based 2-factor structure of preschoolers' emotion knowledge (i.e., recognition of emotional expression and understanding of emotion-eliciting situations) was tested using confirmatory factor analysis. Compared to 1- and 3-factor models, the 2-factor model showed a better fit to the data. The model was found to be equivalent for gender, race, age, and socioeconomic risk. Theory and the high correlation between the 2 latent factors suggested a hierarchical nature of development, in which a higher level of emotion knowledge is built upon a lower level. In our validity model, we found significant paths from the recognition to the situation factor and from the situation factor to teachers' reports of preschoolers' learning behaviors and social competence. Results provide further evidence of the significant role emotion plays in preschoolers' school readiness. Practice or Policy: Early childhood educators can benefit from knowing that recognition of expressions and understanding of emotion-eliciting situations are appropriately teachable in this age range and can focus such teaching upon negative emotions and those that may vary across individuals. Furthermore, relations between these aspects of emotion knowledge and school readiness add to accumulating evidence that early childhood programming focusing upon emotion knowledge has multiple benefits. (Contains 2 figures and 6 tables.)