Imagination is a cognitive process used to generate new ideas from old, not just in the service of creativity and fantasy, but also in our ordinary thoughts about alternatives to current reality. In this paper I argue for the central function of imagination in the development of social cognition in infancy and childhood. In section 1 I review a work showing that even in the first year of life, social cognition can be viewed through a nascent ability to imagine the physical possibilities and physical limits on action. In section 2, I discuss how imagination of what should happen is appropriately constrained by what can happen, and how this influences children’s moral evaluations. In the final section, I suggest developmental changes in imagination – especially the ability to imagine improbable events – may have implications for social inference, leading children to learn that inner motives can conflict. These examples point to a flexible and domain-general process that operates on knowledge to make social meaning.