Counterfactuals are thoughts about alternatives to past events, that is, thoughts of what might have been. This article provides an updated account of the functional theory of counterfactual thinking, suggesting that such thoughts are best explained in terms of their role in behavior regulation and performance improvement. The article reviews a wide range of cognitive experiments indicating that counterfactual thoughts may influence behavior by either of two routes: a content-specific pathway (which involves specific informational effects on behavioral intentions, which then influence behavior) and a content-neutral pathway (which involves indirect effects via affect, mind-sets, or motivation). The functional theory is particularly useful in organizing recent findings regarding counterfactual thinking and mental health. The article concludes by considering the connections to other theoretical conceptions, especially recent advances in goal cognition.Keywords counterfactual thinking; regret; goals; rumination; mental simulation; inference; decision making; conditional; volition; motivation Who among us has never wondered about what might have been had some past choice been different? With perhaps a little more effort, you might have been an athlete, a doctor, maybe even a rock star. Who among us has never regretted choices made and actions taken? Maybe you should have studied harder in school, traveled more when you had the chance, or had the salmon for lunch instead of the pasta. And who has never pondered a lost love and imagined how passionate it might have been? Thinking about what might have been, about alternatives to our own pasts, is central to human thinking and emotion. Such thoughts are called counterfactual thoughts.Counterfactual thoughts are mental representations of alternatives to past events, actions, or states (Byrne, 2005;Roese, 1997). They are epitomized by the phrase "what might have been," which implicates a juxtaposition of an imagined versus factual state of affairs. The term counterfactual derives from philosophical writings in which the logical status of possibility and probabilistic reasoning were closely scrutinized (e.g., Chisholm, 1946;Evans & Over, 2004;Goodman, 1947;Kvart, 1986;Lewis, 1973;Vaihinger, 1965). For example, to say that a basketball team "almost" won a game is to specify a counterfactual outcome with a particular (although not necessarily exact) level of probability. In everyday life, an individual's counterfactual musings often take the form of a conditional proposition, in which the antecedent corresponds to an action and the consequent corresponds to an outcome (e.g., "If only I had studied, I would have passed the exam"). Crucially, counterfactual thoughts are often evaluative, specifying alternatives that are in some tangible way better or worse than actuality. Better alternatives are termed upward counterfactuals; worse alternatives are termed downward counterfactuals (Markman, Gavanski, Sherman, & McMullen, 1993; Please address correspondence to Neal J. R...