Lexical development in mentally retarded and normal children was indexed using the Free Word Association Task. Approximately 170 institutionalized and noninstitutionalized retarded children and 59 normal children were administered the 40-word stimulus list consisting mainly of adjectives and nouns. Responses were categorized according to apparent relationship of response to stimulus word. Findings showed that lexical development proceeds from an idiosyncratic stage to a logical stage, with adjectives passing through an intermediate syntactic stage where selectional restrictions are learned. Lexical development of the retardates appeared to parallel that of normal children in terms of sequence, but was much slower. Data did not support the notion that institutionalization causes any delay in the development of language above and beyond any possible retardation of global MA. (Author/KW)