Purpose: We examined the role of narrative microstructure (production of words and sentences) and narrative macrostructure (organization of events) in the use of internal state terms (ISTs) in narratives of bilingual children with developmental language disorder (DLD) in their school language (SL). Method: Fifty-eight Russian-Hebrew bilingual preschool children aged 55-78 months divided into two groups participated: 16 bilingual children diagnosed with bilingual DLD and 42 with typical language development (TLD). Narratives were elicited in SL/Hebrew using the wordless picture book, Frog, Where Are You? Narratives were transcribed and coded for frequency of ISTs and classified as perceptual, linguistic, motivational, linguistic, emotional, or physical. ISTs were also examined in terms of their role in microstructure (tokens and types) and macrostructure (Character, Setting, Initiating Event, Internal Response, Plan, Attempt, and Consequence) categories. Results: In terms of microstructure, bilingual children with DLD produced fewer word types and tokens in general and fewer perceptual ISTs than bilingual TLD peers. In terms of macrostructure, children with DLD used six out of the seven story grammar elements in their narratives less than bilinguals with TLD. For ISTs and macrostructure, bilinguals with DLD produced fewer linguistic ISTs in Attempts than their peers with TLD. Conclusions: Bilingual children with DLD have difficulties in producing ISTs, and this difficulty is shown to be related to both microstructure and macrostructure abilities. Suggestions for clinical intervention are offered to assist children with DLD in producing narratives that involve mental state language related to characters' feelings, intentions, and goals.