Two studies examined 3- and 4-year-olds' ability to follow the mental ‘sub-text’ of conversations employing ironic intonation. In Study 1, children were asked what a confederate thought was inside a tin, following an exchange in which she saw (joke conditions) or did not see (lie conditions) the contents (a stone) and heard these referred to in neutral or ironic tone as a cake. Study 2 repeated the joke conditions, with the confederate touching the stone. Amongst 4-year-olds, intonation was found to trigger complex assessment of the information available to the confederate, whilst 3-year-olds appeared confused. The data suggest that ability to track the belief implications of conversations is underpinned by substantial improvements in working memory between 3 and 4 years.