This study investigated children's ability to produce compounds by asking them to label contrasting subcategories (e.g., tea-pot vs coffee- pot) as distinct from generic categories (e.g. pot, chair). Sixty Hebrew- speaking children, aged 2;0 to 7;4, and 12 adults, answered three questions about each of a series of picture-sets. The first question checked their ability to understand novel compound (noun-noun) labels for a subcategory, and everyone did very well on this. The next two questions elicited labels for a further subcategory and the perti nent generic or basic category. Adults and older children produced compound nouns as labels for subcategories, and favoured one-word labels for generic categories. Two- and three-year-olds produced mostly inappropriate, one-word labels for both levels of categories. But children's subcategory labels, whether compounds or nouns with relative clause or prepositional phrase adjuncts, consistently included a dimension of contrast, while their generic category labels mentioned the absence of such a dimension. These findings suggest that children early on recognize contrasts among subcategories and between these and generic level categories, but that it takes them some time to learn to produce the appropriate linguistic devices.