The role of the arts in the development of imagination in early childhood is linked with children’s need to explore and learn about their world. Learning to imagine is a crucial step in symbol-making in early childhood. Decentration skills are hypothesised as the link between fantasy or pretense play activities and development in areas such as communication, co-operation, perspective-taking ability, creativity, problem-solving skills and many areas of cognitive development. Children develop their own theories of the world well before starting school and, by being aware of these theories, teachers can build on children’s prior learning rather than negating it. Examples of children’s symbol-making are used to illustrate the process of making meaning. Aspects of children’s learning environments are considered in terms of how effectively they facilitate children’s exploration and the development of imagination.