Background: Traditional disability categories may reveal little of the functional characteristics and social competence of a child. Objective: To compare the social competence of typically developing children, children with established disabilities and undiagnosed children identified by a functional approach to be in need of special support. Methods: Observations were conducted during free play using the Child Observation in Preschools, COP. Results: The variables positive emotion, social emotional warmth, teacher rated engagement and verbal to other children significantly discriminated the three groups. In a discriminant analysis based on group membership only 68% of all cases were correctly classified. Conclusions: Difficulties in classifying undiagnosed children in need of special support and children with established disabilities leads to the question of the fruitfulness of using traditional categories when assessing social competence. Instead a functional approach sensitive to the individual profile of each child is recommended.