Two experiments compared 7- to 8- and 9- to 10-year-olds’ ability to use semantic analysis and inference from context to understand idioms. We used a multiple-choice task and manipulated whether the idioms were transparent or opaque, familiar or novel, and presented with or without a supportive story context. Performance was compared to adults (Experiment One) and 11- to 12-year-olds (Experiment Two). The results broadly support the Global Elaboration Model of figurative competence (Levorato & Cacciari, 1995) with a notable exception: even the youngest children were able to use semantic analysis to derive the meanings of transparent idioms, as well as being sensitive to meaning in context. The findings show that young children process language at both the small-grained phrasal-level as well as the discourse-level to establish figurative meaning and demonstrate that the language processing skills that aid idiom comprehension, as well as idiom knowledge itself, are still not fully developed in 11- to 12-year-olds.