Relations among externalizing behavior, therapeutic context (community care vs. residential care), and social problem-solving by children with mild intellectual disabilities or borderline intelligence were examined. Participants were 186 children (12 to 14 years of age) who responded to a video-based social problem-solving task. Of these, 130 received residential care and the majority suffered from severe externalizing behavior problems. The results indicated that externalizing behavior was related to encoding, generation of aggressive responses, and negative evaluation of assertive responses. Therapeutic context was related to encoding, positive evaluation of assertive responses, and negative evaluation of aggressive responses. Results indicate a discrepancy between appropriate problem-solving skills and behavior in daily life. Implications for interventions are discussed.