Social Anxiety Disorder (SAD) is a common and debilitating condition that typically manifests in adolescence. Here we describe cognitive factors engaged by brain-imaging tasks, which model the peer-based social interactions that evoke symptoms of SAD. We then present preliminary results from the Virtual School paradigm, a novel peer-based social interaction task. This paradigm is designed to investigate the neural mechanisms mediating individual differences in social response flexibility and in participants’ responses to uncertainty in social contexts. We discuss the utility of this new paradigm for research on brain function and developmental psychopathology.