The development of children's metalinguistic understanding of the basic unit of reading--the word--was examined. Subjects were 45 children from preschool, kindergarten, and first grade who were reclassified according to reading ability (nonreadiness, readiness, reader). The children's understanding of the word as a linguistic segment was measured by their ability to segment aural and visual sentences into words, while their understanding of reading terminology was measured by their performance in recognizing and explaining the terms "letter,""word," and "sentence." ANOVA tests for the children's proficiency on segmentation tasks showed significant differences across grade level and reading ability. Analyses of segmentation errors suggested the use of length and configuration cues on the visual tasks, altered intonation patterns on aural tasks, and the influence of sentence length in both contexts. Significantly more readers/first grade students recognized examples of a sentence than subjects in the other reading ability/grade levels. It was concluded that young children's metalinguistic understanding does exhibit developmental trends. (Author/RL)