A robust finding in category-based induction tasks is for positive observations to raise the willingness to generalize to other categories while negative observations lower the willingness to generalize. This pattern is referred to as monotonic generalization. Across three experiments we nd systematic non-monotonicity eects, in which negative observations raise the willingness to generalize. Experiments 1 and 2 show that this effect emerges in hierarchically structured domains when a negative observation from a different category is added to a positive observation. They also demonstrate that this is related to a specic kind of shift in the reasoner's hypothesis space. Experiment 3 shows that the effect depends on the assumptions that the re...