Background: Previous research has reported a link between imaginary companions (ICs) in middle childhood and the perception of verbal material in ambiguous auditory stimuli. These findings have been interpreted in terms of commonalities in the cognitive processes underlying children's engagement with ICs and adults' reporting of imaginary verbal experiences such as auditory verbal hallucinations. The aim of the present study was to examine these relations using improved methodology and a younger sample of children for whom engagement with ICs would be expected to be particularly salient. Method: Data on young children's (age range: 4-8 years) reporting of ICs were gathered in two studies (total N = 80). Responses to ambiguous auditory stimuli were investigated using the new Jumbled Speech task, which measures participants' likelihood of perceiving words in meaningless but speech-like auditory stimuli. Results: Reporting hearing words in the Jumbled Speech task was associated with having a parentally corroborated IC. Hearing words on the task and having an IC were unrelated to age, gender, verbal ability, and understanding of the stream of consciousness. Conclusions: Findings are consistent with the hypothesis that engaging with ICs is one aspect of a general susceptibility to imaginary verbal experiences. We consider the implications for the assumption of continuity in psychopathological experiences between childhood and adulthood.