Examined the relation between affective and cognitive processes in fantasy play and emotional understanding. Sixty-six children in the 1st and 2nd grades played with puppets (Affect in Play Scale; Russ, 1993), answered questions about their understanding of emotions (Kusche Affective Interview-Revised; Kusche, Greenberg, & Beilke, 1988), and completed a measure of verbal intelligence (Wechsler Intelligence Scale for Children-III; Wechsler, 1991). The major finding of this study was that consistent, yet modest, relations were found between dimensions of fantasy play and emotional understanding. Cognitive dimensions of fantasy play, but not affect expression, were related to facets of emotional understanding. These relations were independent of verbal ability. A composite fantasy play score accounted for a significant amount of variance in a composite emotional understanding score when verbal ability was accounted for. Variations in the pattern of correlations for girls and boys suggest sex differences in the relation between fantasy play and emotional understanding. Implications for clinical research and interventions are discussed.