Previous studies of individual differences have revealed strong correlations between children's vocabulary and grammatical abilities, and these data have been used to support theoretical accounts positing direct developmental relations between these two areas of language. However, between-person differences do not necessarily reflect intra-individual dynamics. Thus, in the present study, we analysed longitudinal data from three annual assessments of vocabulary and grammar in 217 children (M[subscript age] = 4 years and 3 months at first assessment) using a modelling strategy with some utility in distinguishing relations at the between- and within-person levels. The results revealed strong correlations between grammar and vocabulary at the between-person level, but the evidence of direct dependencies between the variables at the within-person level was rather limited. Specifically, we found a small direct contribution from grammar to vocabulary for children between the ages of 4 and 5, but there was no evidence of any direct contributions from vocabulary to grammar. Further analyses suggested that the home literacy environment may represent a common source of individual differences in children's vocabulary and grammatical skills. In light of these results, we argue that the evidence of direct relations between vocabulary and grammatical development in preschool-aged children may not be as strong as previously assumed.