We investigate pre-schoolers’ ability in drawing pragmatic inferences based on prosodic information. Previous work has found that young children are generally oblivious to intonational meaning of utterances. In particular, the ability to comprehend contrastive prosody develops late during language acquisition (after the age of 6). In three experiments, we show that preschoolers can engage in prosody-based pragmatic inferences if the context provides supports for them. Furthermore, we find that preschoolers’ interpretation of prosody involves complex counter-factual reasoning (‘what the speaker would have said if she had intended another meaning’). The picture emerging from our studies contrasts with previous work: Through rich contextual inferences, four-year olds are able to bootstrap their interpretation of prosodic information, and achieve adult like performance in intonation interpretation.