Despite much research into individual differences in social understanding among preschoolers, little is known about corresponding individual differences within younger children. Likewise, although studies of preschoolers highlight the importance of mental-state references, other aspects of talk have received less attention. The current study involved 120 families with 2-year-olds; video-based transcripts of observations of family interaction were coded for quantity, connectedness, and content of mothers’ and children’s talk. At 2, 3, and 4 years of age, children completed social understanding and verbal ability tests. Mothers’ connected turns and mental-state reference within connected turns showed independent associations with children’s social understanding (as did children’s mental-state references, both overall and within connected turns). Connected conversations provide a fertile context for children’s developing social understanding.