Studies of adult sentence processing have established that the referential context in which sentences are presented plays an immediate role in their interpretation, such that features of the referential context mitigate, and even eliminate, so-called 'garden-path' effects. The finding that the context ordinarily obviates garden path effects is compelling evidence for the Referential Theory, advanced originally by Crain and Steedman, (1985) and extended in Altmann and Steedman (1988). Recent work by Trueswell, Sekerina, Hill and Logrip (1999) suggests, however, that children may not be as sensitive as adults to contextual factors in resolving structural ambiguities. This conclusion is not anticipated by the Referential Theory and it also runs counter to the Continuity Assumption, which supposes that children and adults access the same cognitive mechanisms in processing language. The purpose of this work was to reexamine the observations that have led researchers to conclude that children, unlike adults, may lack sensitivity to features of the referential context in comprehension and ambiguity resolution. A series of experiments has been conducted to evaluate this conclusion. The findings show that the performance systems of children and adult differ minimally. Children are sensitive to the same features of the referential context as adults are, and they make use of the context to resolve structural ambiguities in sentence interpretation. In addition, the present study provides evidence in favor of children's pragmatic and semantic knowledge.