According to a higher order reasoning account, inferential reasoning processes underpin the widelyobserved cue competition effect of blocking in causal learning. The inference required for blockinghas been described as modus tollens (if p then q, not q therefore not p). Young children are knownto have difficulties with this type of inference, but research with adults suggests that this inference iseasier if participants think counterfactually. In this study, 100 children (51 five-year-olds and 49 six to seven-year-olds) were assigned to two types of pretraining groups. The counterfactual group observed demonstrations of cues paired with outcomes and answered questions about what the outcome would have been if the causal status of cues had been different, whereas the factual group answered factual questions about the same demonstrations. Children then completed a causal learning task. Counterfactual pretraining enhanced levels of blocking as well as modus tollens reasoning but only for the younger children. These findings provide new evidence for an important role for inferential reasoning in causal learning.