Researchers who advocate the hypothesis that cognitive development is akin to theory formation have also suggested that young children possess distinct systems for explaining physical, psychological, and biological principles (see, e.g., Wellman & Gelman, 1992). One way this has been investigated is by examining how children explain human action: Children explain intentional and accidental actions by appealing to psychological principles, and explain impossible physical or biological action in terms of the underlying principles of those domains (Schult & Wellman, 1997). The current investigation examined the coherence of children's explanatory systems by eliciting explanations of possible and impossible physical, psychological, and biological events. Then, in a separate set of stories, children were asked to generate counterfactual alternatives for characters who wanted to perform an event, but did not, either because of a mishap or because the event was impossible. Overall, children were better at generating explanations for why events were impossible than recognizing that no alternative could be generated for impossible events. However, there was some evidence that children's explanatory abilities predicted whether they could correctly reject cases where no counterfactual alternative could be generated. The results lend support to the hypothesis that children's causal knowledge is coherently organized in domain-specific knowledge structures.