This study aims to investigate Mandarin-speaking children's use of two frequently appearing discourse markers – hao ‘okay’ and dui ‘right’ – when interacting with their peers in order to examine how their use of these markers may reflect their communicative skills and the characteristics of peer interaction. The data included 237 min of 5-year-old Mandarin children's conversations with their friends while playing. Schiffrin's (1987) model of discourse structures was used for the analysis.The results showed that Mandarin-speaking children at age five have acquired several discourse functions of hao and dui. They used hao as an agreement marker and an acknowledgement marker in the exchange structure; they used dui to show their agreement in the exchange structure and to mark topic transition in the ideational structure. The children's use of the various functions of hao and dui reflected their communicative and social competence. These uses indexed their collaborative or supportive stance toward one another, which may further help them establish and maintain their relationships with their peers (Wang et al., 2010). However, the children have their limitation in using these markers. They have not developed the ability to use dui as backchannels, which has been shown to be among the last acquired communicative skills (Hess and Johnston, 1988). It is concluded that Mandarin-speaking children's use of hao and dui not only demonstrates their communicative skills but also reflects the particular nature of peer interaction.