The current study examined the influence of observing another's lie- or truth-telling -- and its consequences -- on children's own honesty about a transgression. Children (N = 224, 5-8 years of age) observed an experimenter (E) tell the truth or lie about a minor transgression in one of five conditions: (a) Truth-Positive Outcome -- E told the truth with a positive outcome; (b) Truth-Negative Outcome -- E told the truth with a negative outcome; (c) Lie-Positive Outcome -- E lied with a positive outcome; (d) Lie-Negative Outcome -- E lied with a negative outcome; (e) Control -- E did not tell a lie or tell the truth. Later, to examine children's truth- or lie-telling behavior, children participated in a temptation resistance paradigm where they were told not to peek at a trivia question answer. They either peeked or not, and subsequently lied or told the truth about that behavior. Additionally, children were asked to give moral evaluations of different truth- and lie-telling vignettes. Overall, 85% of children lied. Children were less likely to lie about their own transgression in the TRP when they had previously witnessed the experimenter tell the truth with a positive outcome or tell a lie with a negative outcome.