This study investigated inductive reasoning abilities in 3-5-year-old children across perceptual similarity and linguistic label conditions. Sixty-five typically developing children aged 3 to 5 participated in reasoning tasks involving natural and artificial targets. In the experimental design, children learned two contrasting characteristics associated with distinct individuals and were then asked to identify which attribute applied to a subsequent test stimulus. The comparative framework utilised dual reference points: one sharing identical linguistic labels with the target while displaying distinct property characteristics, and another maintaining property similarities to the target but differing in label information. Results demonstrated that linguistic labels enhanced children's inductive reasoning, particularly with natural objects. Children encountered greater challenges with inductive reasoning when presented with artificial objects. By age 5, participants exhibited significant cognitive development, transitioning from perceptual similarity-based reasoning to more sophisticated category-based conceptualisation. This progression represents a qualitative transformation in reasoning capabilities, marking a critical developmental milestone in early cognitive processing.