Children's understanding of emotion in speech was explored in three experiments. In Experiment 1, 4- to 10-year-old children and adults (N= 165) judged the happiness or sadness of the speaker from cues conveyed by propositional content and affective paralanguage. When the cues conflicted (i.e., a happy situation was described with sad paralanguage), children relied primarily on content, in contrast to adults, who relied on paralanguage. There were gradual developmental changes from 4-year-olds' almost exclusive focus on content to adults' exclusive focus on paralanguage. Children of all ages exhibited greater response latencies to utterances with conflicting cues than to those with nonconflicting cues, indicating that they processed both sources of emotional information. Children accurately labeled the affective paralanguage when the propositional cues to emotion were obscured by a foreign language (Experiment 2, N= 20) or by low-pass filtering (Experiment 3, N = 60). The findings are consistent with children's limited understanding of the communicative functions of affective paralanguage.