The present study investigated the relations between 4- to 6-year-old children’s (N = 67) gender stereotypes, resource allocations, and mental state knowledge in gender-stereotypic contexts. Participants were told vignettes about female and male characters completing gender-stereotyped activities (making dolls or trucks). Children held stereotypic expectations regarding doll- and truck-making abilities, and these expectations predicted the degree of bias in their allocations of resources to the characters. Critically, children’s performance on a Theory of Mind (ToM) Scale (Diverse Desires [DD], Contents False-Belief [FB], Belief-Emotion [BE]) was significantly related to their allocations of resources to individuals whose effort did not fit existing gender stereotypes (e.g., a boy who was good at making dolls). With increasing ToM competence, children allocated resources based on merit (even when the character’s effort did not fit existing gender stereotypes) rather than based on stereotypes. The present results provide novel information regarding the emergence of gender stereotypes about abilities, the influence of stereotypes on children’s resource allocations, and the role of ToM in children’s ability to challenge gender stereotypes when allocating resources.