Adolescence is a period in life that is characterised by substantial changes in the social environment. Compared to childhood, relationships with peers gain more importance and adolescents are particularly sensitive to peer influence. Adolescents, but not adults, show increased levels of risk-taking when in the presence of peers relative to when alone. Experimental studies suggest that heightened levels of risk-taking during adolescence might be specific to affective contexts (e.g. the presence of peers), while risk-taking in non-affective contexts remains stable or decreases. In Chapter 2 of this thesis the development of the impact of two decision variables (risk and valence) on decision-making in a non-affective context during adolescence is investigated in a behavioural risk-taking task. Chapter 3 employs a functional magnetic resonance imaging (fMRI) approach to examine the development of the neural correlates of social influence during adolescence. Previous studies have focussed on peer influence on risk-taking and little is known about the neural mechanisms of peer influence. This thesis examines whether heightened levels of sensitivity to peer influence during adolescence extend to the influence of a peer audience on tasks with either high-level (reasoning) or low-level (perceptual) cognitive components (Chapters 4 and 5). Chapter 4 investigates the effect of the presence of a peer audience on performance in a cognitively challenging task (relational reasoning), the development of this effect during adolescence and whether this effect is dependent on the identity of the audience (peer or non-peer). Chapter 5 examines the effect of the presence of a peer audience on performance in a low-level perceptual task to test whether peer audience effects would also extend to a low-level cognitive task. Chapter 6 investigates the modulation of brain activity during a high-level cognitive task (relational reasoning) by an evaluative peer audience in adolescents and adults.