Methods of assessing children's oral language ability are explored in this paper. Following a discussion of problems involved in the formal assessment of oral language ability, a study is described that revealed that the evaluation of the oral language of 12 kindergarten children in the social context of the natural classroom environment, specifically the sociodramatic area, provided more comprehensive information than did two standardized language tests. Descriptions of children's interactions are provided to show how their interactional competency was categorized according to a new instrument, the "Interactional Competency Checklist." The four main categories examined are the ability to adapt to changes in the setting, nonverbal appropriateness, familiarity with normal constraints and conditions, and sequencing. The paper concludes by suggesting implications pertaining to language evaluation, teacher roles in language assessment, and programing for language instruction and by noting that the assessment of communicative competence must deal with interactional as well as grammatical competence. Illustrative tables and a copy of the "Interactional Competency Checklist" are included. (GT)