Western parents often give children overly positive, inflated praise. One perspective holds that inflated praise sets unattainable standards for children, eventually lowering children's self-esteem (self-deflation hypothesis). Another perspective holds that children internalize inflated praise to form narcissistic self-views (self-inflation hypothesis). These perspectives were tested in an observational-longitudinal study (120 parent–child dyads from the Netherlands) in late childhood (ages 7–11), when narcissism and self-esteem first emerge. Supporting the self-deflation hypothesis, parents’ inflated praise predicted lower self-esteem in children. Partly supporting the self-inflation hypothesis, parents’ inflated praise predicted higher narcissism—but only in children with high self-esteem. Noninflated praise predicted neither self-esteem nor narcissism. Thus, inflated praise may foster the self-views it seeks to prevent.