The outcome of the master's paper Neologisms in children's picture books is to explore the types of neologisms in picture books, determine their number and analyse the word-formation process. Also, the children's language development will be described and the function of neologisms in children’s picture books will be determined. In this paper, the attention is directed toward the types and ways of creating neologisms which appear in children's picture books. The language creativity, when it comes to word-formation the authors use in picture books, is going to be observed. Considering the linguistic and communication skills of children and the age for which the children's picture books are meant, the way of adapting text in children's picture books in the sense of neologisms and to create an approach to the target group, and which ways of formatting new words prevails is going to be observed. The research is going to be conducted by observing neologisms in all the parts of the children's picture book Mrljek i Prljek by Jelena Pervan. The paper is going to, in detail, explain the very term “neologism” and the way they are created. Each process is going to be individually explained for the neologisms in all parts of the picture books Mrljek i Prljek to be presented. All the found neologisms are going to be showcased in a table, after which the second part of the research will ensue, dealing with the detailed analysis of all neologisms found in picture books Mrljek i Prljek, with most of the attention being given to their creation. The results are going to show the abundance of neologisms and the word-formation processes most often used.