A study investigated how young children understand natural kind terms by examining how 3- and 4-year-olds rely on category membership to draw inductive inferences about objects. One hundred four children (53 girls and 51 boys) from six preschools in California and Michigan participated in the study. The children were shown 10 sets of pictures of natural objects or creatures, told something about the items shown, and asked to draw inferences about other natural kind pictures. Two conditions were added: word only condition and picture only condition. Results suggest that even the youngest children assume that objects with the same name share underlying similarities. When given just labels, the children used them as a base for making inductions, and when labels and appearances conflicted, they relied more on labels than appearances. Even when no labels were given, the children sometimes figured out what categories the pictures belonged to and used this inference to decide about other properties. It is concluded that children are clearly sensitive to the power of language for organizing and extending language, and that words that refer, even common nouns, serve to identify objects as well as foster inductions. (MSE)