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In this presentation we have offered some ways of conceptualizing the role played by cognitive factors in the development of the toddler and preschool child's interactive skills. Starting with the concept of mental-representational structure we have outlined cognitive processes whose operation we have inferred from observation of interactions between age-mates in a nursery setting. In observing three sets of such processes (planning, identification of social cues and cognitive matching) we have also attempted to acknowledge the importance of a developing core of positive feelings about the self within the child. The formation of the positive cohesive self structure has been viewed not only as an integral component of this development but also as a beneficiary of the interactive skills which emerge from the young child's interactions with age-mates. The mutual contributions made by the emergence and continued growth of these skills and narcissistic equilibrium was discussed as a key characteristic of the developmental line from ego-centricity to companionship.