Word segmentation, detecting word boundaries in continuous speech, is a fundamental aspect of language learning that can occur solely by the computation of statistical and speech cues. Fifty-four children underwent functional magnetic resonance imaging (fMRI) while listening to three streams of concatenated syllables, which contained either high statistical regularities, high statistical regularities and speech cues, or no easily-detectable cues. Significant signal increases over time in temporal cortices suggest that children utilized the cues to implicitly segment the speech streams. This was confirmed by the findings of a second fMRI run where children displayed reliably greater activity in left inferior frontal gyrus when listening to ‘words’ that occurred more frequently in the streams of speech they just heard. Finally, comparisons between activity observed in these children vs. previously-studied adults indicate significant developmental changes in the neural substrate of speech parsing.