Linguistic messages often have more than one interpretation. For example, the sentence “The coffee is in the mug” could refer to a mug containing a coffee drink or a mug holding coffee beans. To understand what a speaker really means, listeners combine the words they hear with clues from the context and their knowledge of the speaker’s intentions. This process involves considering what the speaker knows, believes, and is trying to communicate. Our research examines these inferencing skills in how children and adults understand meaning in everyday communication. We study various linguistic phenomena that are considered challenging for children (and sometimes even adults), such as conditionals (e.g., If you eat candy, you will get cavities), counterfactuals (e.g., If it had rained, the road would have been wet) and figurative language (e.g., Sarah is a bouncing bubble). We investigate these questions with a variety of offline (e.g., truth-value judgements, forced choice paradigms) and online (e.g., non-invasive eye-tracking technology) methodologies.