Despite extant evidence of negative peer treatment of transgender adolescents and adults, little is known about how young children perceive transgender peers, particularly those who have socially-transitioned, or are living in line with their gender, rather than sex at birth. Whereas children have been shown to be averse to gender nonconformity in peers, because many transgender children appear and behave in ways consistent with their expressed gender (but not their sex at birth), it is unclear how children evaluate these identities. In two studies, we investigated 5- to 10-year-old children's (N total =113) preferences for transgender vs. gender-"typical" peers who either shared their gender identity or did not. We also examined whether children categorize transgender peers by their sex or expressed gender, as this might inform their evaluations. Children preferred cisgender peers over transgender peers; however, they also liked peers of their own gender rather than the other gender (e.g., female participants preferred girls over boys), demonstrating that the oft-documented own-gender bias plays an important role even when children are reasoning about transgender peers. Children did not reliably categorize transgender peers by sex or gender; yet, those who categorized transgender peers by their sex showed greater dislike of transgender peers. The current studies are the first to investigate cisgender children's attitudes toward transgender children, and suggest that perceptions of gender categorization and conformity play a role in children's evaluations of transgender peers.