Previous work suggests that children’s ability to understand metaphors emerges late in development. Researchers argue that children’s initial failure to understand metaphors is due to an inability to reason about shared relational structures between concepts. However, recent work demonstrates that preschoolers, toddlers, and even infants are already capable of relational reasoning. Might preschoolers also be capable of understanding metaphors, given more sensitive experimental paradigms? I explore whether preschoolers (N = 200, ages 4-5) understand functional metaphors, namely metaphors based on functional similarities. In Experiment 1a, preschoolers rated functional metaphors (e.g. “Roofs are hats”; “Clouds are sponges”) as “smarter” than nonsense statements. In Experiment 1b, adults (N = 48) also rated functional metaphors as “smarter” than nonsense statements (e.g. “Dogs are scissors”; “Boats are skirts”). In Experiment 2, preschoolers preferred functional explanations (e.g. “Both hold water”) over perceptual explanations (e.g. “Both are fluffy”) when interpreting a functional metaphor (e.g. “Clouds are sponges”). In Experiment 3, preschoolers preferred functional metaphors over nonsense statements in a dichotomous-choice task. Overall, this work demonstrates preschoolers’ early-emerging ability to understand functional metaphors.