Relations between children’s imaginary companion status and their engagement in private speech during free play were investigated in a socially diverse sample of 5-year-olds (N = 148). Controlling for socioeconomic status, receptive verbal ability, total number of utterances, and duration of observation, there was a main effect of imaginary companion status on type of private speech. Children who had imaginary companions were more likely to engage in covert private speech compared with their peers who did not have imaginary companions. These results suggest that the private speech of children with imaginary companions is more internalized than that of their peers who do not have imaginary companions and that social engagement with imaginary beings may fulfill a similar role to social engagement with real-life partners in the developmental progression of private speech.