Children often hold "essentialist" intuitions about social categories, viewing them as reflecting people's intrinsic essences or biological natures. This intuition promotes prejudice development (e.g., race-and gender-based prejudices). However, emerging research reveals that essentialism also mitigates prejudice development (e.g., weight-and sexuality-based prejudices). Why do children's essentialist views sometimes promote prejudice, and other times mitigate it? I propose that causal discounting may account for these distinct effects: Essentialism may promote prejudice by leading children to discount structural explanations (i.e., to reason that a group is low-status because of its personal deficiencies rather than its structural disadvantages), but it may mitigate prejudice by leading children to discount agentic explanations (i.e., to reason that a group was "born that way" rather than choosing to be that way). Thus, the consequences of essentialism may reflect both the explanations children endorse as well as those they discount.Cognitive, developmental, and social implications are discussed.