The study examined the moral development of three groups of children who had been subjected to varying degrees of political violence and economic advantage. The study attempted to determine if group membership or gender influenced the level of moral reasoning or orientation. Ninety-three 8- to 13-year-old Israeli Jewish and Bedouin school children, and Palestinian West Bank school children were asked various moral reasoning questions based on an animal fable involving a moral dilemma under three (hypothetical, role-taking, political) conditions. Israeli Jewish children gave mutuality solutions to moral dilemmas more frequently than Israeli Bedouin or Palestinian children as the questions shifted from abstract to real-life situations. There were no significant gender differences between Jewish children and Bedouin children in hypothetical issues; however, violence and limited resources affected moral judgment in real-life situations for boys, but not for girls. These findings support the hypothesis that moral reasoning in children is significantly linked to real-life situations and resources. The article discusses the results in terms of their relevance to future researchers and the manner in which children interpret moral questions. Figure, tables, references, appendix