The author draws on his own extensive research in urban classrooms to present a grounded theoretical model of young children's understanding of picture storybooks. Advancing a much broader and deeper theory of literary understanding, the author suggests that children respond in five different ways during picture storybook readalouds; that these responses reveal that children are engaged in five different types of literary meaning-making; and that these five types of meaning-making are instantiations of five foundational aspects of literary understanding. Capturing the liveliness of children's responses, this dynamic volume describes picture storybooks as sophisticated aesthetic objects worthy of children's literary critical abilities; offers a theory of literacy understanding that is relevant to contemporary young children from a wide variety of ethnic, racial, and socio-economic backgrounds; includes a wealth of examples of children's responses and how teachers scaffolded the children's interpretation of stories; and examines the significance of young children's literary interpretation, factors that influence literary understanding, and implications for practice and further research.