Children begin to reason about gender and others' gender-typed preferences from early in life, yet not enough is known about whether their reasoning reflects only binary categorization or a more nuanced way understanding of variation in gender. Further, little is known about how children's conception of their own gender affects how they think about others. In the current study, 3–6-year-old preschool children (n = 56) were asked to predict preferred and nonpreferred toys that included feminine, neutral, and masculine options for other children who were described using their binary gender identity (i.e., a gender-typical hairstyle, name, pronouns) and their home environment (i.e., room decoration and toys which were provided by their parents and were either feminine, neutral, or masculine). Children also participated in tasks to assess their own gender-typed toy preferences and their own gender identity using two continuous scales for identification with girls and with boys and their gender-typed behavior was rated by their preschool teachers. Results indicated that children considered both binary gender and information about the home environment when predicting others' toy preferences. Further, children's greater reliance on an individual's binary gender identity when allocating toys was related to the rigidity of their own gender identity and their own gender-typed toy preferences. Together, these findings add nuance to our understanding of children's developing reasoning about gender identity and preferences and reinforce that children can conceptualize gender as more than a binary category.