Twenty-two second and third grade children experiencing difficulties with social relationships and reading comprehension participated in small group Relationally Oriented Reading Instruction for eight weeks. Developmental and literacy assessments done before and after the reading intervention showed statistically significant improvements in the understanding of text and in social imagination. Analysis of writing samples resulted in a typology of relationally oriented response. Together these data provide initial evidence linking the understanding of texts to the development of other relational capacities like social imagination, and indicate that purposeful use of picture books within relationally oriented reading instruction may enhance this development. (Contains 7 tables.)