Most pupils in primary schools agree that they should be divided into ability groups - and believe it helps their teachers to set suitable work, say researchers.
Dr Susan Hallam and Dr Judith Ireson, both from London university's Institute of Education, and Jane Davies, based at Sunderland university, interviewed 144 pupils - aged seven to 11 - in six primary schools about dividing children into ability groups.
The researchers discovered that the majority of pupils were aware of how and why they were grouped, saying it was to match work to pupils' needs.
One pupil said: "It's for the Sats - they want to see who's clever. They don't want to put everyone in one set because it will be too hard for some people."
Most pupils said they were satisfied that they had been allocated to a suitable group and did not want to change their school's practice.
But children were also aware of the disadvantages of grouping by ability.
One in four children said that pupils in lower sets could be stigmatised, and 17 per cent of pupils disliked not being able to sit with friends. Less able pupils were happier in mixed-ability classes though clever pupils were more likely to be teased.
But the researchers said pupils were still less aware than teachers of the pecking order of ability in their classes.
They found that pupils in the school which made most use of streaming also made the most accurate estimate of their own abilities.
Pupils in the school which used mixed-ability groups were less accurate, with two-thirds of boys overestimating their ability and 55 per cent of girls underestimating their ability.
The authors concluded that the evidence for the academic benefits of ability grouping was equivocal and that it should be adopted with caution.
The researchers also found that most pupils were positive about school, regardless of the type of grouping.