Discourse competence requires the ability to use demonstratives both deictically and anaphorically. We investigate the development of this ability by examining demonstrative pronouns and spatial adverbs in children’s narratives in Turkish, a language with a three-way demonstrative system. We show that at a general level, three- and four-year-old children’s use of demonstratives differ from five- and sixyear- old children’s use both quantitatively and qualitatively. The youngest children exhibit the highest amount of deictic reliance while five- and six-year-olds exhibit a considerable decrease in deictic use, particularly in the use of the proximal demonstrative (bu) and the proximal spatial adverb (bura-). At around age five, two parallel developments take place: (i) Children start to add more plot components to the narratives, and (ii) the use of demonstrative pronouns/spatial adverbs in the anaphoric or cataphoric mode increases. We take these results as signs of developing narrative skills and of reference maintenance, ultimately discourse structuring. We also observe that in the context of narratives, the development of bu/bura- is an early accomplishment but the distal demonstrative/spatial adverb o/ora- seems to lag behind the acquisition of bu/bura-. We argue that both language-specific issues and our data collection procedure play a role in our findings.