Psychological essentialism is a pervasive conceptual bias to view categories as reflecting something deep, stable, and informative about their members. Scholars from diverse disciplines have long theorized that psychological essentialism has negative ramifications for inter‐group relations, yet little previous empirical work has experimentally tested the social implications of essentialist beliefs. Three studies (N = 127, ages 4.5–6) found that experimentally inducing essentialist beliefs about a novel social category led children to share fewer resources with category members, but did not lead to the out‐group dislike that defines social prejudice. These findings indicate that essentialism negatively influences some key components of inter‐group relations, but does not lead directly to the development of prejudice. Three studies examined the implications of essentialism‐‐induced via exposure to generic language‐‐for children's beliefs and attitudes towards a novel social group. Across studies, hearing generic language led children to have more essentialist beliefs about the group and to share fewer resources with group members, but did not lead to out‐group dislike. Essentialism thus underlies some negative intergroup phenomena, but does not lead directly to the development of prejudice.