This study explores formal aspects and functions of 420 novel noun-noun (NN) compounds in diary data from three Swedish children (1;9–6;11). With regard to form, the data show that the children’s compounds respect target head order, allow for a small amount of internal inflection, and, in more than half of the cases where a liaison form is required, are properly formed. Most of the compounds concatenate two nouns (without the presence of liaison forms), as is the general case for Swedish NN compounds. With regard to function, the data permit us to distinguish three main functions of the coinages: I. Novel compound instead of established term, II. Novel compound for novel category, and III. Novel compound for specific entity. Type I involves attempts to target conventional compounds by relying either on perceptual or functional features or on recalled semantic, phonological, and/or morphological cues. Type II is innovative compounding par excellence: detailed discriminations and fantasy concepts are named. Type III divides into anaphoric and deictic uses as well as what we call appropriation, i.e. naming a specific entity. Types II and III are functions displayed by novel compounds in general. In conclusion, the three children seem to master the central facets of NN compounds, formally and functionally. Furthermore, compound production can constitute a simple and efficient means for young children to maximize and build more structure into their lexicon.