The social problem-solving skill of generating effective alternative solutions was tested as a moderator of the relation between negative life stress and depressed mood in children. Boys (n = 25) and girls (n = 25), ages 8 to 12 years, from inner-city, lower socioeconomic group families, completed measures of depression symptoms, negative impact of life events, and quantity and effectiveness of alternative solutions to social problems. Results indicated that the effectiveness of alternative solutions children generate in response to peer social problems moderates the relation between stress and depression. Children who experienced a high impact of negative life events, with less effective social problem-solving skills, reported higher levels of depression compared to children who experienced a high impact of negative life events but exhibited more effective social problem-solving skills. Results are discussed in terms of alternative theoretical models for the mechanisms whereby effective social problem-solving skills moderate stress-related depression.