Contextual influences on private speech were examined in two preschools differing in the learning environments they provide for children. Observations of 3- to 5-year-olds were made during free-choice periods in a Montessori and a traditional (play-oriented) program. Consistent with Vygotsky’s theory that make-believe play serves as a vital context for the development of self-regulation, the incidence of private speech was much higher during open-ended activities, especially fantasy play, that require children to determine the goal of the task, than during closed-ended tasks with predetermined goals. In line with previous research, the more direct involvement, or external regulation, teachers displayed, the lower the rate of children’s private speech. In addition, transitions (as opposed to involvement in activities) were linked to reduced private speech, whereas engagement with peers, in the form of associative play, predicted greater self-directed language. Diminished make-believe play, greater teacher direct involvement, and heightened time spent in transitions largely accounted for the lower incidence of private speech in the Montessori compared with the traditional preschool. Contextual factors also contributed to a drop in private speech at age 5. Implications for fostering children’s verbal self-regulation during early childhood are considered.