Pupil observation and educator—pupil discourse have recognised relevance within early years practitioners' repertoires, with long traditions of practice in England and elsewhere. Observation is now enshrined within the Foundation Stage Curriculum for 3–5 year‐olds (England) (soon to become part of the Early Years Foundation Stage for Birth‐5) and is advocated in fulfilling the Foundation Stage Profiling (assessment) requirements for individual children. This article begins by drawing on research by the author and on related research and theory to illustrate some complexities in learning processes in young children. The research has led to the development of an observation‐interpretation tool—the Social Play Continuum. The Continuum, a tool to support the formative dimensions of observation, details progression in learning whilst the broader research has illustrated factors impacting on progression. An example of researcher—pupil dialogue is then analysed to consider the related dilemmas and potential of discourse within formative assessment. The article considers whether current policy development and documentation sufficiently recognise and encompass learning complexities and learner potential in young children.

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In this study, 11 traditional play activities available in one nursery classroom attached to a primary school were investigated for their potential in contributing towards the development of sociability and cooperation in children aged 4 years. The levels of sociability and cooperation were determined through use of an observational schedule which supported the recording of reciprocal sequences of play behaviours and discourse employed by interacting children as they engaged with individual activities. Event sampling was used. As well as revealing insights into the interactive potential of these traditionally available activities, the findings have also provided some foundation for the formulation of a developmental framework for recognising sociability and cooperation in interacting peers. Links with individual cognitive development in cooperative settings are explored with particular reference to Vygotskian theory. Some implications for the use, by practitioners, of the developmental framework in nursery settings are considered. Ongoing research applications are briefly discussed.

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