This study examined mothers' use of fantasy in speech to young children. Observations of mothers in free-play interactions with their 12-to 27-month-old children formed the basis for an analysis of the frequency and type of fantasy relationships encoded in maternal speech. Results suggested that fantasy speech to roughly year-old children was relatively infrequent and restricted to descriptions of the feelings, actions, and functions of animate and inanimate objects. Speech to 1½-year-olds encoded essentially the same fantasy characteristics, but mothers of children in this age group introduced more distinct instances in their fantasy talk. A more notable change occurred in the fantasy utterances directed to 2-year-olds. Mothers of these children talked about non-existent imaginary objects, and often asked the child to extend a play episode by providing a new fantasy element. These findings were discussed in terms of the nature and function of the dyadic interactions in which mothers' fantasy talk occurred.