As a unique story genre, fairy tales have been widely used as a rich resource for cultural activities in the preschool education setting. This chapter synthesizes different theoretical sources—cultural and historical psychology, psychoanalysis and drama-in-education—to unveil the different ways of using fairy tales for promoting children’s social and emotional development. It is stated that the legacy of cultural and historical psychology approaches children’s development through mechanisms of conflicting emotions, duality and emotional significance with a lesser emphasis on the heaviness of the emotional core in the fairy tales and the intentionality of development. Psychoanalysis sheds light on the children’s emotional world for symbolic formation through fairy tales, the dynamics of which can be captured well in drama-in-education workshops as a new methodology for researching children’s development through fairy tales.