This study aims to explore how the reading of picture books aids in young children’s understanding of social relationships. The interactions between children and teachers in eight kindergartens and six nurseries during and after the shared reading of a picture book were observed and qualitatively analyzed. A semi-structured interview with each participating teacher was conducted a week after the observed reading. In all but two cases, it was found that the teachers had chosen a picture book with a storyline (“story-type book”). Many books described the nature of friendship and ways to build and maintain those relationships. The children were engaged in guessing, remembering the story line, and empathizing with the protagonists in the books. However, verbal interactions between children and teachers were led mainly by the teachers. Post-reading activities that had been pre-planned by the teachers included art, drama, writing letters or poems, singing, games and campaigning for causes related to the books that had been read. This study discusses the role of the teacher in the context of reading picture books themed on social relationships and implications to children’s character education.