The association between perceived friendship quality (FQ) and social information processing (SIP) was examined in three groups of children and their close friends aged 7–12 years: 16 anxiety disordered children with social phobia (SP); 12 anxiety disordered children without SP (No-SP); and 32 nonclinical children. Positive and negative FQ positively associated with target children’s positive and negative responding on a vignette measure of SIP. SP children reported lower positive SIP than No-SP but not nonclinical children; and this was the only group difference in SIP. Target children and their friends were similar in negative but not positive SIP. Following discussion about the vignette with a close friend, all target children increased in positive SIP; negative SIP did not change. Lower FQ and a more socially anxious friend predicted higher negative target child SIP postdiscussion. Close friendships play an important role in the SIP of both clinical and nonclinical children.