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While sociocultural and interactionist accounts of narrative development acknowledge the importance of social scaffolding, less is known about how group dynamics and processes operate to create powerful learning environments in classrooms. This paper presents findings from two separate studies examining how peer group-level factors, specifically group laughter and peer interactions, contributed to narrative gains in the context of small-group, story-sharing circles implemented in a prekindergarten summer camp. Preliminary results indicate that story-sharing circles with a higher proportion of children making narrative gains had more instances of group laughter and approximately 2.5 times more instances of peer talk. Thus, narrative skills were especially scaffolded in circles with higher peer engagement, indicating a group-level effect of peer contexts on narrative development.