Video game-playing for less than an hour a day was linked with better-adjusted children and teenagers in the study.
The study by Oxford University researchers found no positive or negative effects for young people who played 'moderately' between one to three hours a day.
Researchers also said the influence of video games on children, for good or for ill, is very small when compared with more 'enduring' factors, such as whether the child is from a functioning family, their school relationships, and whether they are materially deprived.
It involved nearly 5,000 young people, half male and half female, drawn from a nationally representative study of UK households.
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Participants, between 10 and 15 years old, were asked how much time they typically spent on console-based or computer-based games.
The same group also answered questions about how satisfied they were with their lives, their levels of hyperactivity and inattention; empathy; and how they got on with their peers.
The results suggest that three in four British children and teenagers play video games on a daily basis, and that those who spent more than half their daily free time playing electronic games were not as well adjusted.
The study also compared non-players and those who played very frequently, those who played video games for less than an hour (estimated to be less than one-third of their daily free time), were associated with the highest levels of sociability and were most likely to say they were satisfied with their lives.
They also appeared to have fewer friendship and emotional problems, and reported less hyperactivity than the other groups.
"These results support recent laboratory-based experiments that have identified the downsides to playing electronic games," said study author Dr Andrew Przybylski from the Oxford Internet Institute.
"Likewise, the small, positive effects we observed for low levels of play on electronic games do not support the idea that video games on their own can help children develop in an increasingly digital world," Przybylski said.
The study was published in the journal Pediatrics.