Mexican American children in Grades 2 (n = 22) and 6 (n = 25) were interviewed about their understanding of ethnic prejudice and were administered two indices of ethnic identity (ethnic knowledge and ethnic behavior). Most of the children (n = 19) were third generation or later (no parent or grandparent born in Mexico), bur Ir had at least one parent born in Mexico. Parents of the children were administered acculturation and ethnic socialization measures. Study results suggested that (a)parental ethnic socialization about ethnic discrimination was associated with children's development of ethnic knowledge, (b) low levels of parental acculturation to Angle norms were associated with children performing ethnic behaviors, and (c) children's advanced understanding of ethnic prejudice was associated with high levels of ethnic knowledge and higher grade levels. These results support and extend Bernal, Knight, Garza, Ocampo, and Cota's multifaceted model of ethnic identity: One aspect of ethnic identity (i.e., ethnic knowledge) was predictive of children's understanding of ethnic prejudice, whereas another index (i.e., ethnic behavior) was not Moreover, this study's results support Quintana and Vera's model of children's developmental understanding of ethnic prejudice. This study suggests that children's understanding of ethnic prejudice represents an important aspect of the development of Mexican American. children.