The present study examined the issues of environment risk, competence, and narrative ability in a group of low-income preschool children. Current developmental research has examined the factors that promote resilience or competence in young children's lives and one way this has been explored is through the narrative ability of children. Twenty-five children from lower socio-economic backgrounds who attended day care participated in the study. The participants were assessed for their level of environmental risk and competence and were asked to complete stories based on everyday household events. Each story was coded for the amount of information units, level of chronology, and level of organization. It was found that children who had lower levels of competence generated narratives that lacked both chronology and organization. The level of environmental risk did not appear to be related to competence and narrative ability. The relationship between competence and narrative ability is discussed as an important issue in the day care and future school environment.