A series of three experiments examined children's sensitivity to probabilistic phonotactic structure as reflected in the relative frequencies with which speech sounds occur and co-occur in American English. Children, ages 2-1/2 and 3-1/2 years, participated in a nonword repetition task that examined their sensitivity to the frequency of individual phonetic segments and to the frequency of combinations of segments. After partialling out ease of articulation and lexical variables, both groups of children repeated higher phonotactic frequency nonwords more accurately than they did low phonotactic frequency nonwords, suggesting sensitivity to phoneme frequency. In addition, sensitivity to individual phonetic segments increased with age. Finally, older children, but not younger children, were sensitive to the frequency of larger (diphone) units. These results suggest not only that young children are sensitive to fine-grained acoustic-phonetic information in the developing lexicon but also that sensitivity to all aspects of the sound structure increases over development. Implications for the acoustic nature of both developing and mature lexical representations are discussed.