A number of psychologists have acknowledged that a sense of humor develops in children as young as 12 months.  Here are some often identified stages in developing a sense of humor:

Stage 1: At the onset of symbolic play the child treats one object as if it were another.  Humor is created by creating in fantasy-play a set of conditions that are at odds with reality.  Actions are required.  For example, a child picks up a leaf and talks as if it were a telephone.

Stage 2: Between 2-and 3-years, the child uses words to create incongruities by mislabeling objects or acts.

Stage 3: At about age 3, humor occurs when important characteristics of things are violated.  Children begin to play with sounds of words.  Repetitious rhyming and creating nonsense words begins.  Dr. Seuss books are popular at this stage, and continue to be favorites of children for several years.