The focus of this research is the role of the concept of the Vygostky’s zone of proximal development (ZPD) in early childhood education. It highlights how this approach is helpful in the evaluation and assessment of mental and social development of children. The concept of ZPD alludes to cognitive functioning of children and their development that precedes from interaction with more capable and competent others, the competent adults (teachers) who take the initiative to impart education through guidance and encouragement in problem solving settings and adapt their level of help according to the requirement of the children and motivate them by placing in a challenging situation above their level to make them reach a level beyond the current zone, by exercising their full potential. With this concept of ZPD, the method of participant observation and conversation analysis has been used to study the eight selected 6-year old children who were stimulated with story-telling and observed for the roles they pick to play and the vocabulary usage. The study concludes that story-telling opens up the avenues for the children to go beyond their actual level of development and learn the language in a better manner through the acquisition of new words and try to use these words in their play and reach ZPD.