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Evidence suggests that children in out-of-home care function better when placed in kinship compared with foster care. Less is known about the functioning of children in the unique form of kinship care where grandparents are caring full-time for their grandchildren in informal care arrangements. As grandparent carers are increasingly taking on this role, it is timely to investigate the functioning of the children in this form of care and the characteristics of the grandparents themselves. We compared the functioning of children in the two types of care. We also investigated carer characteristics, including the relationship between child functioning, social support and daily hassles on carer stress. One hundred fourteen cares and 180 children were assessed on a range of demographic and clinical measures. Children in grandparent care were displaying better behavioural and adaptive functioning than children living with foster carers. Grandparent carers reported higher levels of distress in the carer role. Predictors of carer stress included severity of child behaviour problems and daily hassles. Both group of carers and the children in their care would benefit from increased support from treatment services. [ABSTRACT FROM AUTHOR]