The inability to regulate affective arousal in the context of frustration may jeopardize children’s ability to form successful friendships, especially as new peer groups are formed during the transition to kindergarten. While substantial research has utilized teacher reports of children’s socioemotional behavior, there is less empirical evidence on the peer perspective. The present study utilized data from n = 235 kindergarteners (54% high in disruptive behavior) recruited for a multicomponent intervention. We examined whether physiological reactivity to frustration was associated with children’s social success. Peer nominations of liking or disliking to play with the child were used to compute a social preference score, where negative values reflect greater rejection than acceptance. Multilevel growth modeling was employed to capture changes in respiratory sinus arrhythmia (RSA) reactivity across a manipulated inhibitory control task administered in 3 blocks, with differing algorithms embedded to induce affect: points were earned in the 1st and 3rd blocks (reward) and lost during the 2nd block (frustration). Groups did not differ in RSA reactivity during the 1st block, but children who experience greater peer rejection showed significant decreases in RSA (increases in arousal) across frustration. This increased arousal persisted across the 3rd block despite the reinstatement of reward, indicating a greater degree of reactivity and a lack of recovery relative to peer-accepted children. Teacher screenings of disruptive behavior only partially aligned with peer ratings of acceptance, highlighting the benefits of leveraging peer report to capture regulatory functioning and identify children for intervention recruitment.