In three experiments, children's ability to identify examples of magic and their credulity towards magic were studied. In Expts 1 and 2 children were asked to distinguish between two equivalent outcomes: one outcome was brought about in an ordinary causal fashion whereas the other violated a familiar physical principle. Taken together, the two experiments show that children aged 3 to 5 years systematically judge the latter type of outcome as magical. Nonetheless, Expt 3 showed that some young children have a credulous stance towards magical outcomes. Having checked that each of two boxes was empty, children aged 3, 5 and 7 years were asked to pretend that one of the two boxes contained a potentially attractive entity (either a fairy or an ice cream). Most children could be allocated to one of two groups: sceptical children who mostly ignored the boxes when left alone, and insisted that it was empty; and credulous children who typically opened a box and acknowledged that they had wondered if the pretend entity was inside it. Overall, the three experiments show that most young children know what counts as magic but vary in their credulity.