Using real-time eye-movement measures, we asked how a fantastical discourse context competes with stored representations of real-world events to influence the moment-by-moment interpretation of a story by 7-year-old children and adults. Seven-year-olds were less effective at bypassing stored real-world knowledge during real-time interpretation than adults. Our results suggest that children privilege stored semantic knowledge over situation-specific information presented in a fictional story context. We suggest that 7-year-olds’ canonical semantic and conceptual relations are sufficiently strongly rooted in statistical patterns in language that have consolidated over time that they overwhelm new and unexpected information even when the latter is fantastical and highly salient.