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This study investigated the relation between children’s use of defense mechanisms and their understanding of those defenses. We hypothesized that, once a child understands how a particular defense functions, the use of that defense will no longer be successful and will be replaced by another defense mechanism that is not yet understood. Defense use was assessed from the Thematic Appreception Test (TAT) stories told by 122 children; defense understanding was determined from the children’s understanding of stories portraying defenses. The results indicated that younger children (mean age = 7–8) used the defense of denial more than the older children (mean age = 9–11). Older children understood the functioning of denial and projection better than the younger children. A comparison of children who did and did not understand a defense showed that younger children who understood the functioning of denial were less likely to themselves use denial. Likewise, older children who understood the functioning of projection were less likely to use this defense.