Young children can generalize from known to novel, but the underlying mechanism is still debated. Some argue that from an early age generalization is category-based and undergoes little development, while others believe that early generalization is similarity-based, and the use of categories emerges over time. The current research brings new evidence to the debate. In Experiment 1 (N = 118), we presented 3- to 5-year-olds and adults with a category learning task followed by an exemplar generation task. Then, in Experiment 2 (N = 126), we presented the same tasks but provided participants with additional conceptual information about the category members. Our results indicate that early reasoning undergoes dramatic development: whereas young children rely mostly on salient features, adults rely on category information. These results challenge category-based accounts of early generalization while supporting similarity-based accounts.