The spontaneous speech of 14 children aged 2;6 to 5;6 was recorded. One additional child provided longitudinal information from age 2;4 to 5;6. In a second study, 75 children were tested for mastery of hypothetical reference in a story-telling situation. The speech samples from Study 1 and the children's answers from Study 2 were analyzed for eight types of hypothetical reference. The results demonstrate that there is a developmental shift during the preschool years from implicit to explicit hypothetical reference. Initially, children tend to refer to isolated hypothetical events rather than to sequences of events. When reference to sequences does begin, attempts lack internal consistency with respect to hypotheticality. Reference to future hypothetical events appears to be an earlier acquisition than reference to past events. Other-initiated hypothetical references occurred much more often than self-initiated references, but the latter were consistently more accurate than the former. A speculative account for the development of these patterns is offered. (JB)