What can we learn by observing how children process and interpret compound terms? The aim of this study was to explore how children’s pragmatic development is reflected in their interpretation of compound nouns, revealing their growing adherence to linguistic norms, but also their increasing openness to unconventional reference. Across three experiments employing a picture selection task for referent selection, young children were presented with lexicalized and novel exocentric and endocentric compound nouns. Examining age-related differences in referent selection, Experiment 1 (baseline), tested the preference for conventional and semantically transparent referents. Experiment 2 showed that an individual speaker influenced referent selection across both age groups, with 5-year-olds showing more accommodation of the speaker’s intended meaning. Experiment 3, examining gaze behavior, indicated that both 3- and 5-year-olds decompose lexicalized compound terms similarly to novel compounds. This research highlights the interplay between language and social development, showcasing key stages in children's pragmatic development.