How would you respond?
DD (almost 4) playing with another family whom we know really well and play with a lot. Later that night at home, she said the boy (5) showed her his privates and she showed hers. She said they didn't touch each others' privates.
How do you balance the realization that this is typical exploration, but still make an impression on your child that this is NOT okay? What to you say when this happens? This is my first experience with this.
Well, we don't see it as "not okay" in our family. Our kid is often naked with other kids, of all genders, either getting dressed, taking a bath, changing clothes, in the bathroom etc, running naked in the sprinkler etc. So ds has had many opportunities to be naked with other kids. I'm not saying you *have* to let your kid be naked with other kids, but is pretty typical that they might be nude around one another.
If she'd like more exposure to other's naked bodies (i.e. if you don't have other kids at home, so she never gets a glimpse of a siblings nudity) there are age approriate books like "It's not the stork" and others, that show naked bodies. This would allow her to "explore" in a safe way and give you a concrete way to answer any questions she might have about people's bodies. I know "Its Not the Stork" has a section on "good touch, bad touch" although I don't remember if it has anything specifically about not showing body parts.