Narrative discourse and intellectual functioning were examined 3 years following traumatic brain injury (TBI) in children 1 to 8 years of age at the time of injury. The language-impaired TBI group (n = 9) had language deficits during the subacute stage of recovery; their performance was contrasted with that of a TBI comparison group equated on neurologic and demographic variables that did not show subacute language impairment (n = 8) and a sibling comparison group (n = 9). The language-impaired TBI group had lower Verbal and Full-Scale IQ scores and produced fewer words and utterances than the sibling group on a story retelling task; their stories were characterized by fewer complete referential and lexical ties and more referential errors, indicating difficulty conjoining meaning across sentences. The language-impaired TBI group recalled approximately one-third of the propositions needed to maintain the story theme and made more errors sequencing the propositions than either the TBI or the sibling comparison groups. Group differences were not obtained on the Performance IQ scores or on measures of rate or fluency of speech production, mazes, use of conjunctives, or naming errors. The discourse deficiencies of children with TBI and acute language impairment were most pronounced at the level of cognitive organization of the text reflecting text macrostructure and were least apparent at the level of lexical and sentential organization reflecting text microstructure. Results are discussed in terms of the vulnerability of developing language abilities to disruption by brain injury.