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Children's use of deception in a naturalistic setting was observed longitudinally in 40 families when children were 2 and 4 years old, and again two years later. Goals included describing children's lying behavior and parents' reactions to lies, and comparing lies to other false statements. Lies were commonly told to avoid responsibility for transgressions, to falsely accuse siblings, and to gain control over another's behavior. Unlike children's other false statements (e.g., mistakes, pretense), lies were distinctly self-serving. Parents rarely addressed the act of lying itself but often challenged the veracity of lies or addressed the underlying transgression. Older siblings lied more often than younger ones, and parents who allowed older siblings to lie at Time 1 had children who lied more often at Time 2. Results are considered from a speech-act perspective and in terms of children's developing understanding of mental states.