This paper examines relations between the extent of children's peer relationship problems at age 9 and their later risks of educational under-achievement and unemployment by the age of 18 years. Results showed that children with high rates of early peer relationship problems were at increased risk of under-achievement and unemployment when compared with children with low rates of early peer relationship problems. These elevated educational and occupational risks were explained by two processes. First, associations between early peer difficulties and later disadvantage were in part noncausal, and arose because of the personal characteristics (IQ and attentional problems) and social backgrounds (socioeconomic adversity, exposure to parental change, and punitive parent–child interaction) of children with early peer problems. Second, problematic peer relations during childhood appeared to place young people at increased risk of a range of adolescent interpersonal and school-related difficulties, including weaker peer attachments, interpersonal problems with teachers, school truancy, suspension, and early school leaving. In turn, these experiences and behaviours served to reduce the educational and employment opportunities of children with early peer problems. Results highlight the importance of childhood peer relationships for academic and occupational success.