This paper examines the types of discourse, and prosocial and rejecting interaction strategies that were observed to occur in preschool children's spontaneous peer talk during self-directed free play. Possible effects of activity type during free play on children's language use and social interaction strategies are considered. The circumstances in which three types of abstract discourse, pretend play, story-telling, and banter, were observed in the children's spontaneous speech are examined. The results indicate that unstructured free play with peers in a classroom setting provides a unique and rich learning opportunity for an important but frequently overlooked aspect of school readiness: developing the language and social skills that constitute social competence in the classroom.