The aim of this study was to explain why children have difficulty with homonymy. Two experiments were conducted with forty-eight children (Experiment 1) and twenty-four children (Experiment 2). Three- and four-year-old children had to either select or judge another person's selection of a different object with the same name, avoiding identical objects and misnomers. Older children were successful, but despite possessing the necessary vocabulary, younger children failed these tasks. Understanding of homonymy was strongly and significantly associated to understanding of synonymy, and more importantly, understanding of false belief, even when verbal mental age, chronological age, and control measures were partialled out. This indicates that children's ability to understand homonymy results from their ability to make a distinction characteristic of representation, a distinction fundamental to both metalinguistic awareness and theory of mind.