Recent findings have highlighted the importance of children's social understanding – specifically their reasoning about beliefs and emotions – for school achievement. However, little is known about the processes that may account for such a relationship. In this longitudinal study we examined the role of children's social competence (as indexed by peer relationships and social skills), using a multi-informant and multi-indicator approach. We followed 73 children during the transition to primary school, gathering data at three time points: Time 1 (age 5), Time 2 (age 7) and Time 3 (age 8). Structural equation modelling showed that Time 1 social understanding predicted Time 2 social competence, which in turn predicted Time 3 school achievement, independently of verbal ability. Moreover, social competence mediated the relationship between early social understanding and later school achievement. Theoretical and practical implications of these findings are discussed. © 2017 Elsevier Inc.