This study demonstrates that symbolic play has merit as a curricular tool for early literacy development. Naturalistic observation of four prekindergarten teachers and their classes revealed ways in which teachers can facilitate early literacy development by functioning as participants within the context of young children's spontaneous symbolic play. Children participating in the study were midwestern, middle-class, mainly white preschoolers between 3 and 5 years of age. In-service training to further teachers' understanding of natural literacy development preceded data collection. During a 2-week period, data were gathered for 30-minute periods for 8 days, primarily by means of videotaping and audiotaping of children's symbolic play in play centers used in the classrooms. Primary data were supplemented with teachers' recorded observations and children's written language products. Analysis of teaching-learning episodes was based on Vygotsky's theory of the zone of proximal development. Each teacher's behaviors were classified as either extending or redirecting. The teachers evinced extending and redirecting interaction styles, but to different degrees. All four teachers used considerably more extending than redirecting interaction. Findings supported Vygotsky's theory and suggested pedagogical implications for early childhood teachers and teacher educators. Examples of children's functionl writing are included and approximately 70 references are cited. (RH)