This paper reports on an investigation of children's (aged 3;5-9;8) comprehension of sentences containing ambiguity of prepositional phrase (PP) attachment. Results from a picture selection study (N = 90) showed that children use verb semantics and preposition type to resolve the ambiguity, with older children also showing sensitivity to the definiteness of the object NP as a cue to interpretation. Study 2 investigated three- and five-year-old children's (N = 47) ability to override an instrumental interpretation of ambiguous PPs in order to process attributes of the referential scene. The results showed that while five-year-olds are capable of incorporating aspects of the referential scene into their interpretations, three-year-olds are not as successful. Overall, the results suggest that children are attuned very early to the lexico-semantic co-occurrences that have been shown to aid ambiguity resolution in adults, but that more diffuse cues to interpretation are used only later in development.