The mutual exclusivity (ME) assumption is proposed to facilitate early word learning by guiding infants to map novel words to novel referents. This study assessed the emergence and use of ME to both disambiguate and retain the meanings of novel words across development in 18‐month‐old monolingual and bilingual children (Experiment 1; N = 58), and in a sub‐group of these children again at 24 months of age (Experiment 2: N = 32). Both monolinguals and bilinguals employed ME to select the referent of a novel label to a similar extent at 18 and 24 months. At 18 months, there were also no differences in novel word retention between the two language‐background groups. However, at 24 months, only monolinguals showed the ability to retain these label–object mappings. These findings indicate that the development of the ME assumption as a reliable word‐learning strategy is shaped by children's individual language exposure and experience with language use.