Theoretical conceptualizations of emotion understanding generally imply a two‐factor structure comprised of recognition of emotional expressions and understanding emotion‐eliciting situations. We tested this structure in middle childhood and then explored the unique predictive value of various facets of emotion understanding in explaining children's socioemotional competence. Participants were 201 third‐grade children and their mothers. Children completed five different measures, which provided eight distinct indices of emotion understanding. Mothers completed two questionnaires assessing children's socioemotional skills and problems. Results indicated that: (a) emotion understanding in third‐grade children was differentiated into three unique factors: Prototypical Emotion Recognition, Prototypical Emotion Knowledge, and Advanced Emotion Understanding, (b) skills within factors were modestly related, (c) factors varied in complexity, supporting theoretical and empirical models detailing developmental sequencing of skills, and (d) skills in Prototypical Emotion Knowledge were uniquely related to mothers’ reports of third‐grade children's socioemotional competence. Implications regarding elementary‐school‐age children's social cognitive development are discussed.