This paper investigates ethnic differences in children’s socioemotional difficulties and possible explanations for any observed inequalities. We used data collected from the fourth sweep of the Millennium Cohort Study when children were aged 7 years. We found that Pakistani, Bangladeshi, and Black Caribbean children had significantly more socioemotional difficulties than White children. These differences were partially explained by the relative socioeconomic disadvantage of their families. After accounting for maternal and family environment factors, the differences for Pakistani children remained unexplained. In contrast, Black African children were the only ethnic minority group to have significantly fewer socioemotional difficulties. We investigated the role of four indicators of socioeconomic position in explaining these differences and found equivalised household income had the strongest influence on socioemotional difficulties, and that socioeconomic position associations with socioemotional difficulties were less apparent among Pakistani and Bangladeshi children. The association between adverse economic conditions and socioemotional difficulties was partially mediated by maternal psychological distress. In conclusion, unexplained ethnic differences in socioemotional difficulties were seen, with a disadvantage among Pakistani children and an advantage among Black African children. Our results point to the need to address economic deprivation among ethnic minority groups to reduce children’s socioemotional difficulties.