Young children are often thought to confuse fantasy and reality. This study took a second look at preschoolers' fantasy/reality differentiation. We employed a new measure of fantasy/reality differentiation--a property attribution task--in which children were questioned regarding the properties of both real and fantastical entities. We also modified the standard forced-choice categorization task (into real/fantastical) to include a "not sure" option, thus allowing children to express uncertainty. Finally, we assessed the relation between individual levels of fantasy orientation and fantasy/reality differentiation. Results suggest that children have a more developed appreciation of the boundary between fantasy and reality than is often supposed.