Existing research on callous-unemotional (CU) traits and conduct problems primarily focuses on the concurrent or unidirectional associations between these constructs (i.e., from CU traits to CP), with less attention given to their dynamic interplay during middle childhood. It is possible that socialization agents, such as peers, play a significant role in shaping the dynamic relation between CU traits and conduct problems early in development. Additionally, prior studies have shown that both CU traits and conduct problems are associated with poorer peer functioning. Considering the social information processing theory, which emphasizes the impact of cognitive processes on emotions and behavior in youth, this study evaluated the moderating role of cognitive appraisals (i.e., rumination, self-blame, and other-blame) in the context of peer conflict on the bidirectional association between callous-unemotional (CU) traits and conduct problems over the course of 1 academic year. The sample included 349 third- through fifth-grade students (51% boys; 53.2% Hispanic/Latinx) and their homeroom teachers (n = 30). At Time 1, children reported on their cognitive appraisals in response to peer conflict. Teachers provided reports of children's CU traits and conduct problems at Time 1 and Time 2. Results indicated that conduct problems and other-blame uniquely predicted increases in CU traits over time. Further, high levels of self-blame and rumination exacerbated the prospective link from CU traits to subsequent conduct problems. These findings highlight the importance of addressing cognitive processes in prevention approaches aimed at reducing the risk of conduct problems and CU traits among children.