As part of a larger project concerned with the development of changes in children's understanding of meaning as they become literate, this study examined the age at which listeners begin to acknowledge paraphrasing as a legitimate response to questions about the utterances of characters in stories. Subjects were 54 native English speakers from middle-class day care centers and schools in a large urban area who ranged in age from 3 to 9 years. Eight simple stories involving Sesame Street characters (four warm-up stories and four experimental stories) were developed for the study, with each story containing four to five sentences that described a common event. An utterance from one of the characters became the target sentence for subsequent paraphrasing. There were four possible conditions for each of the test stories: true paraphrase, false paraphrase, true verbatim, and false verbatim. Results showed that the children could not judge two utterances to be different in form yet equivalent in meaning until the age of 6 or 7 years. Results also indicated that younger children had particular difficulty in excluding a good paraphrase when they were asked to accept only a verbatim utterance. (MM)