A major purpose of the research reported here is to determine whether or not children of minority backgrounds possess the ability to tell stories and verbalize in narrative form at age 3 and 4. Narratives and speech play were collected over a 9-month period in two Headstart classes in Honolulu (Hawaii). The children, most of mixed backgrounds, ranged in age from 2 years 11 months to 4 years 8 months. Data were collected by video and audio taping of context and speech in classroom settings during free-play time, on the playground, and at home. The data analysis focused on four issues: (1) the extent to which the children could construct narratives and how they did so, (2) effective ways to elicit narratives, (3) facilitation of narration by verbal interaction among the children, and (4) inference of the social rules underlying narrative performance in groups of children from this social background. Findings indicate that the first of these issues is of prime importance; some, but not all of the children were capable of telling stories. In addition to this, it seems that verbal interaction among children rather than an explicit request from an adult is an effective elicitation influence. These findings are discussed and implications are drawn for the developing and testing of narrative competence. (AMH)