Social functioning is a major indicator of psychosis risk and evidence is lacking regarding social functioning development during preadolescence in children at familial high risk of schizophrenia (FHR-SZ) or bipolar disorder (FHR-BP). We aimed to investigate development of social functioning from age 7 to 11 in children at FHR-SZ or FHR-BP compared with population-based controls. At 4-year follow-up, 179 children at FHR-SZ (mean age 12.0 y, SD 0.3), 105 children at FHR-BP (mean age 11.9 y, SD 0.2), and 181 controls (mean age 11.9 y, SD 0.2) participated. We used the Vineland-II to measure social functioning. Development of social functioning was non-significantly different across groups on the Socialization Composite score as well as the subscales Interpersonal Relations, Play and Leisure, and Coping Skills. At 4-year follow-up, children at FHR-SZ demonstrated impaired social functioning, whereas children at FHR-BP displayed social functioning comparable to controls except from impaired coping skills. From age 7 to 11, the maturational pace of social functioning in children at FHR-SZ and FHR-BP is parallel to that of controls. Children at FHR-SZ show stable social functioning deficits, whereas children at FHR-BP show normal social functioning except from emergence of discretely impaired coping skills at age 11.