This study explores children's development of dual-level phonological processing posited by generative theory for adult language users. Evidence suggesting 6-year-olds' utilization of morphophonemic segments was obtained by asking children to imitate complex words, omit specified portions, and discuss the meaning of the resulting word-parts. The words represented instances in which phonetic forms differ significantly from underlying representations. Language-advanced first graders produced more evidence suggesting morphophonemic segments than language-delayed age-mates; young adults supplied more evidence than either first grade group, a result consistent with the assumption that children's segments begin in early childhood at phonetic levels and gradually become more abstract. Nevertheless, the strength of evidence from language-delayed youngsters leads to the interpretation that these 6-year-olds are forming and using morphophonemic segments, and that differences in performance between groups must derive from differences in metalinguistic abilities and experience with particular lexical items (as well as cognitive and maturational factors) rather than from differences in the units of phonological processing. The data suggest further that first graders are not responding to acoustic-phonetic cues in order to recover the appropriate base form of a word, supporting the inference that young children refer to an underlying representation containing a morphophonemic segment in order to perform this task. (Author/AMH)