Insides and essences are both critical concepts for appreciating the importance of non-obvious entities: neither are observable, both contrast with external appearances, and both can be more important than external appearances. The present research examined understandings of insides and essences in 3- to 5- year-old children. In Study 1, children were asked questions requiring them to think about both the insides and the outer appearances of a series of objects. In Study 2, children were tested on their understanding that insides are typically more important than outer surfaces for an object's identity and functioning. In Studies 3, 4, and 5, children were tested on their understanding of innate potential, a concept that reflects understanding of an inborn essence. Contrary to the traditional view of children as externalists (cf. Piaget, 1951), these studies demonstrate that by age 4 children have a firm grasp of the importance of both insides and essences. Even by age 3 children reason clearly about the inside- outside distinction. These results suggest that preschool children attend to non- obvious features and realize their privileged status. They may also indicate a more basic predisposition toward psychological essentialism in young children.