We introduce computer-based methodologies for investigating object identification in 3- to 5-year-old children. In two experiments, preschool children and adults indicated when they could identify degraded pictures of common objects as those pictures either gradually improved or degraded in clarity. Clarity transformations were implemented in four ways: blurring, decreasing the picture's physical size, decreasing the pixel signal-to-noise ratio, and cropping. In Experiment 1, all age groups correctly identified objects at a more degraded state when those objects began moderately, as opposed to very, degraded and then clarified. This finding supports the notion that previous perceptual hypotheses interfere with object identification (i.e. the perceptual interference effect). In Experiment 2, children, but not adults, overestimated their ability to recognize objects in a degraded state when the object's identity was given to them beforehand. This suggests that for young children knowledge of the object's true identity cannot be ignored when evaluating their current perceptions. This is the first demonstration of the perceptual interference effect in children. We discuss both methodological and theoretical implications of the findings for research on object perception and theory of mind.