This study documented how young children talked about story in a supportive environment. Participants were 22 kindergartners and their teacher, who engaged in extended talk about story after listening to a picture book or chapter from a novel. Data collected included transcripts of videotaped conversations during large- and small-group discussions after story, informal interviews, memos, and field notes. Qualitative analysis of the data revealed that the teacher's questions and responses encouraged literary talk and decreased as the children grew in their ability to respond in literary ways. Teacher talk served to set the climate for engaged listening, encouraged children to transact with the text, and established an environment that supported literacy development. (Contains 2 figures.)