This study examined how children use and understand various forms of irony (sarcasm, hyperbole, understatement, and rhetorical questions) in the context of naturalistic positive and negative family conversations in the home. Instances of ironic language in conversations between mothers, fathers, and their two children (Mages=6.33 and 4.39 years) were recorded during six 90-min observations for each of 39 families. Children's responses to others' ironic utterances were coded for their understanding of meaning and conversational function. Mothers were especially likely to ask rhetorical questions and to use ironic language in conflictual contexts. In contrast, fathers used hyperbole and understatement as frequently as rhetorical questions, and employed ironic language in both positive and conflictual contexts. Children also showed evidence of a nascent ability to use ironic language, especially hyperbole and rhetorical questions. Family members used rhetorical questions and understatement proportionately more often in a negative interaction context. Finally, older siblings understood irony better than younger siblings, and both children's responses revealed some understanding of ironic language, particularly sarcasm and rhetorical questions. Overall, the results suggest that family conversations in the home may be one important context for the development of children's use and understanding of ironic language.