This chapter focuses on the importance of caring adults to create conditions through communicative and play activities to support children’s emotional experience and imagination. An important theoretical point of the chapter is that children’s development of imagination through play activity in preschool is a foundation for learning of subject matter concepts in school. Vygotsky’s Double Stimulation experiment is reinterpreted to be about preschool children’s development of imagination instead of concept learning. When children engage with subject matter knowledge in school, I argue that their imagination still develop and become part of children’s concept development. The chapter also advocates a methodology that allows the researcher access to study children’s emotion and cognition from child’s perspective that I have formulated as the Interactive Observation Method. The Interactive observation Method is used to study the changes in children’s imagination when moving from day-care to school. Drawing on both the phenomenological and the cultural-historical approach the unity between child and environment is conceptualized with an analytical focus on the child’s intentional relation to the world—this relation is exemplified with empirical cases of children’s transition from preschool institutions to school. The researcher when observing a child’s or children’s intentional activity and their relation to the world, herself must be seen a as part of the method. The method therefore may be seen as a second person perspective research approach.