This dissertation examines the meaning-making of children (ages 2-5) as they read and play with picture books related to social justice themes, such as identity and diversity, in a preschool and childcare center. The study goal is to investigate the analysis of children's meaning-making of picture books to understand the social world around them from the children's perspectives. In addition, I uncover children's use of interpretation tools across events to elaborate on critical thinking and social issues. Theoretically, my study sits within the larger field of research on children's imagination and picture book readings at the intersection of play theories, social justice theories, and sociocultural theories of literacy. I use those theories to help me locate a school that supports play and picture book reading with imagination skills. I found a university-based preschool (ages 2-5 years) in Madison, Wisconsin, explicitly following a play-based curriculum and anti-biased education approach. This school has been the research site for five months. I have been gathering data to theorize and document how socially and ethnically, and culturally diverse young children make meaning of social justice-related picture books to understand the social world around them from the children's perspectives. Recent incidents of racism in the last three years during the COVID-19 Pandemic speak to the importance of the social justice topic to American society. Schools need to nurture "social imagination, "and teaching with learning for democracy needs to be a transformative experience. Teaching with picture books can be the catalyst for making individual connections to democracy for children. Social imagination can help students imagine a socially just world through picture books. This case study's findings indicate that young children (ages 2-5 years) make meaning of children's picture books related to social justice themes such as identity and diversity. While they make meaning, they use their play activities, imagination skills, and funds of knowledge when the diverse texts come with teacher and peer scaffolding in early childhood classrooms. These findings support the importance of teacher scaffolding and the need to provide time and space for free play activities. Furthermore, it is also significant to provide picture books related to social justice themes with student-initiated and teacher-supported play activities around the picture book readings so that young children can enhance their imagination skills. These findings open up the possibilities of creating socially just classroom environments and refine ideas about the power of play within the enormous scope of children's imagination and meaning-making of picture books. Moreover, we understand the importance of forming the foundation of a theory of literacy, social justice, play, and imagination that encompasses creating a socially just world around young children in early childhood education classrooms. Recommendations from the study come for early childhood educators, curriculum designers of formal or informal learning environments, policymakers, and researchers who seek to better understand the relationship between literacy, play, imagination, and social Justice in contemporary classroom environments. [The dissertation citations contained here are published with the permission of ProQuest LLC. Further reproduction is prohibited without permission. Copies of dissertations may be obtained by Telephone (800) 1-800-521-0600. Web page: http://bibliotheek.ehb.be:2222/en-US/products/dissertations/individuals.shtml.]