Children's memories improve throughout childhood, and this improvement is often accompanied by a reduction in suggestibility. In this context, it is surprising that older children learn and reproduce more factual errors from stories than do younger children (Fazio & Marsh, 2008). The present study examined whether this developmental reversal is limited to production tests, or whether younger children are still less suggestible when the final test (multiple-choice) asks them to recognize the answer. A second goal was to explore the role of source monitoring in children's suggestibility by examining children's awareness of learning within, versus before, the experiment. Five-year-olds and 7-year-olds listened to stories containing correct, neutral, and misleading references and later took either a multiple-choice or short-answer general knowledge test. In addition, they judged whether each answer had appeared in the stories and whether they had known it before the experiment. Critically, a developmental reversal in suggestibility was observed on both tests; younger children were less suggestible even when faced with the story errors at test. Although older children showed superior source discriminability for whether their answers had appeared in the stories, they showed an illusion of prior knowledge, believing they had known their misinformation answers all along. To this effect, older children's increased suggestibility may be due not only to their superior memory capacity for specific story errors, but also to their ability and tendency to integrate story information into their knowledge base.