Several recent studies suggest that there is a link between children's development and the types of neighbourhood in which they live. This paper examines the relationship of a classification of different types of neighbourhood to children's cognitive and behavioural outcomes using British data on children who have a parent who is a member of the 1958 Birth Cohort Study. Substantial variations in children's outcomes were observed between the neighbourhood types. Part of the variation between neighbourhood types was accounted for by various family risk factors but children living in neighbourhoods classified as Deprived City Areas continued to have higher levels of behaviour problems and lower cognitive test scores than average after adjustment for these factors. Significant adjusted associations were also found between living in neighbourhoods described as Middling Britain and lower cognitive test scores and neighbourhoods described as Prosperous Areas and better cognitive test scores. For children's cognitive outcomes, both the size and statistical significance of coefficients on the neighbourhood categories were smaller than those of family-level measures. In contrast, residence in a Deprived City Area was as significant as the family factors in predicting higher levels of behaviour problems. The association between behaviour problems and family risk factors was mediated by the home environment and cohort member parent's psychological health. Mediated effects were stronger for the family risk factors behavioural problems association than for the neighbourhood classification.