This study examined social interaction as a mediator between externalized behaviour difficulties and children's engagement in preschool. Data from 663 children (340 boys), aged 18–71 months, were collected at 81 Swedish preschool units in six municipalities to test a path model that included child, teacher, and child groups. The results indicated that behaviour difficulties and engagement may occur simultaneously. Hyperactivity had a direct negative influence on engagement, which was not the case with conduct problems. Teachers’ responsiveness as well as positive interactions with peers had an indirect influence on the relationship between hyperactivity and engagement. Responsive staff and positive interactions within the child group seem to contribute to children's engagement despite hyperactivity. Children's engagement, as well as special support to stimulate engagement in preschool, is discussed.