The purpose of this study was to investigate the process of transition from home to early childhood centre or playgroup for three children with and three children without Down Syndrome (DS). This qualitative study explored the first month of attendance and focused on: i) how the children became valued members of a peer group (facilitative inclusion) and whether the processes differed for the children with DS, ii) how the typically developing children experienced the child with DS and iii) the extent to which the experiences of children with DS were dependent on the broader socio-cultural context. Results indicated that the typically developing children experienced inclusion into same status roles including the most advanced forms of these (parallel play and social play) virtually always when they interacted with peers. In contrast, peers often excluded the children with DS from any valid role or included them into inferior roles (e.g. baby or object). Peers were often unsure how to include the child with DS and used their existing schema to view her/him as a baby or they developed new categories for understanding the child such as ‘mystery’ or ‘not like me.’ Unequal relationships or avoidance of the child stemmed from such beliefs. The lack of facilitative inclusion had major implications for the children’s social and cognitive development. Investigation into the processes underlying the outcomes in each setting indicated a number of barriers. While all staff were enthusiastic about the presence of the child with DS, there were discrepancies between their understandings, and practices, of inclusion and the intentions underlying the various inclusion policies in New Zealand. Recommendations for altering pedagogical practices in early childhood settings and policy to support facilitative inclusion conclude the study.