Background This study examined whether the association between peer victimization and externalizing behavior may be illuminated by individual differences in skin conductance level reactivity (SCLR) in the context of peer stress. Methods Participants included 123 fifth and sixth graders (Mean age = 12.03 years, 50% females; 42% ethnic minorities). SCLR was assessed in the context of an ecologically relevant, lab‐based peer‐evaluative stress experience in preadolescence. Results As hypothesized, self‐reported peer victimization was linked with parent‐ and teacher‐reported externalizing behavior, and SCLR consistently moderated these associations. Peer victimization was associated with parent‐ and teacher‐reported externalizing behavior among preadolescents who exhibited lower SCLR, but not among preadolescents who exhibited higher SCLR. Conclusions Results suggest that promoting engagement with peer stress experiences and enhancing inhibitory control are potential intervention targets that may reduce externalizing behavior in the context of peer victimization (or reduce peer victimization among preadolescents who exhibit externalizing behavior).