The ability of 3.5-to 5-year-old children to use phrase structure and inflectional information in form-class assignments of novel nouns and verbs was investigated in two experiments. In Experiment 1 performance was assessed on singular and plural nouns and on verbs with -s and -ing inflections. Accurate form-class assignments were made for all but the -ing inflection. This is attributed to a conflict between phrase structure and inflectional cues. In Experiment 2 a new sentence frame was used with verb -ing, which did not present conflicting cues. Performance was significantly better than in Experiment 1. The results are interpreted in terms of a model that proposes that phrase structure and inflectional cues to form-class are learnt independently but serve as interacting sources of information. The cues may interact in a complementary or competitive fashion. For English, the competition is resolved, in developmental terms, in favour of phrase structure cues as the more reliable source of information about form-class. This is adaptive for the grammar of English. When children hear novel or unfamiliar words they must be able to determine the referents of these words for language learning to occur successfully. One source of information which the child can use is the situation that an utterance describes. If the situation contains a novel referent and the utterance a novel word, then a reasonable assumption for the child to make would be that the novel word refers to the novel referent (Merriman 1986).