We present an algorithmic model for the development of children’s intuitive theories within a hierarchical Bayesian framework, where theories are described as sets of logical laws generated by a probabilistic context-free grammar. Our algorithm performs stochastic search at two levels of abstraction – an outer loop in the space of theories, and an inner loop in the space of explanations or models generated by each theory given a particular dataset – in order to discover the theory that best explains the observed data. We show that this model is capable of learning correct theories in several everyday domains, and discuss the dynamics of learning in the context of children’s cognitive development.