We examined knowledge-based inference in 6-, 8- and 10-year-olds. Participants listened to texts where the number of clues for an inference was manipulated and then judged whether single-word probes (target inference, competing inference, literal word from the text and an unrelated concept) were related to the story. Accuracy and response times were analyzed with mixed-effects models. Inference accuracy was higher with three clues, and older children responded to the inference more accurately and quickly than younger children. The inference and literal probes were compared: 10-year-olds responded more accurately and quickly to the inference; however, 6-year-olds were more accurate for the literal. We propose that by 10-years of age, children are able to activate knowledge-based inferences while listening to text. All age groups had some inhibition difficulty, with less accurate and slower responses for the competing inference than the unrelated concept. Inference instruction should be sensitive to developmental differences in inferential processing.