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Evaluated physiological and behavioral reactivity to a novel stimulus in 24 preterm and 24 full-term infants at 8 mo and examined its association with developmental competence. Infants who reacted to the stimulus with increased vagal tone more often engaged in focused examination and exhibited greater range in exploratory play than those whose vagal tone decreased in response to the stimulus. Some differences in developmental performance were detected based on term status. Preterm perinatal risk factors were inversely associated with exploratory examination and range. Results are discussed in terms of a challenge model for assessing behavioral and physiological functioning. (PsycINFO Database Record (c) 2012 APA, all rights reserved)