BASIC LINGUISTIC CAPACITY IS PRESENT EXTREMELY EARLY IN CHILDREN. TWO-YEAR-OLDS UNDERSTAND TRANSITIVE ACTIVE SENTENCES AND THREE-YEAR-OLDS UNDERSTAND MANY PASSIVE SENTENCES. OLDER CHILDREN (THREE-YEAR-OLDS) UNDERSTAND SOME SENTENCES LESS WELL THAN YOUNGER CHILDREN (TWO-YEAR-OLDS). THIS BRIEF DECREASE IN COMPREHENSION ABILITY IS DUE TO THE TEMPORARY OVER-GENERALIZATION OF PERCEPTUAL STRATEGIES WHICH ARE DRAWN FROM THE CHILD'S EXPERIENCE. IN THE AUTHOR'S VIEW, THE YOUNG CHILD PASSES THROUGH THREE PHASES WITH RESPECT TO THE DEVELOPMENT OF EVERY CONCEPTUAL CAPACITY--(1) DEPENDENCE ON BASIC PERCEPTUAL AND CONCEPTUAL MECHANISMS, (2) EXTENSION OF THOSE BASIC MECHANISMS BY GENERALIZATIONS DRAWN FROM EXPERIENCE, AND (3) THE DEVELOPMENT OF A BROAD CONCEPTUAL BASE WHICH MEDIATES BETWEEN THE BASIC MECHANISMS AND THE GENERALIZATIONS. THE PRESENT RESEARCH ON 263 CHILDREN SHOWS THAT THE YOUNG CHILD'S CAPACITY TO UNDERSTAND AND ACT OUT SIMPLE SENTENCES GOES THROUGH THIS KIND OF DEVELOPMENTAL SEQUENCE. (AUTHOR/AMM)