Lexical innovations represent unconventional forms resulting from unsuccessful rule application by children as they unpack regular patterns in their language and develop a set of guidelines that govern their early word use. They are novel words, coined specifically to refer to an object, process or event, for which the child has not learnt the conventional form. The study used an ethnographic approach to investigate how Luo children, acquiring their native language, Dholuo, engaged in the production of lexical innovations in an effort to bridge the lexical gaps in their mental lexicons, resulting from their failure to retrieve or learn the conventional forms. It reports that children manipulated word-formation paradigms of Dholuo to create lexical innovations which, in turn, were related Dholuo derivational morphology.