The goal of this research was to assess children's beliefs about the reality status of storybook characters and events. In Experiment 1, 156 preschool age children heard realistic, fantastical, or religious stories, and their understanding of the reality status of the characters and events in the stories was assessed. Results revealed that 3-year-olds were more likely to judge characters as real than were 4- and 5-year-olds, but most children judged all characters as not real for all story types. Children of all ages who heard realistic stories made more claims that the events in the stories could happen in real life than did children who heard fantastical stories. Five-year-olds made significantly more claims that events in religious stories could happen in real life than did younger children. In Experiment 2, 136 4- and 5-year-olds heard similar stories. Results replicated those from Experiment 1, and also indicated a growing awareness of the basic nature of realistic fiction.