The research reported in this paper investigated the effects of semantic relatedness of words (closely related vs. distantly related) and morpheme type (free morpheme vs. bound morpheme) on young Chinese children's homophone awareness, an aspect of morphological awareness, in two experiments. The first experiment was a cross-sectional study including 39 children in a beginning kindergarten class, 39 children in an intermediate kindergarten class, and 36 children in a senior kindergarten class. The second experiment was a 7-month longitudinal study involving 43 first graders and 50 second graders at the beginning of the study. In both experiments, the children judged whether orally presented words shared the same morpheme or contained homophonous morphemes. The results suggest that homophone awareness emerges in Chinese children in the kindergarten years. Children's morpheme identification is facilitated by the semantic proximity of words that share a morpheme, and awareness of free morphemes is developed before that of bound morphemes. Furthermore, although semantic relatedness is the most prominent factor in kindergarten, its effect varies as a function of morpheme type in the early primary grades. Our research sheds light on the developmental course of morphological awareness and the factors that influence it.