Around 5 or 6 years of age, children begin to recognize that speakers who make ironic remarks do not believe what they literally say, but children of the same age do not show appreciation for the humor function of irony (Dews et al., 1996; Harris & Pexman, 2003). We investigated 7- to 10-year-old children's interpretations of verbal irony and focused on factors that might modulate children's impressions of humor in irony. Results showed that (a) children tended to identify with the target, not the speaker, of ironic remarks and perceived less humor in irony when they did so; (b) children's appreciation of the teasing function of irony, like the humor function of irony, continues to develop late in middle childhood; and (c) children did not use relationship information (speaker and target were friends, strangers, or enemies) as a cue to the speaker's humorous intent. We suggest that these characteristics of children's theories of verbal irony are a function of their social knowledge and representational skills.