A key question for social cognition is: Can we provide an adequate theoretical analysis of the process of understanding other human beings? For over twenty years, there have been only two possible answers to this question—that offered by “Theory Theory”, and that of “Simulation Theory”. The central claim of TT is that one’s understanding of another essentially relies on a folk-psychological theory, where some take the position that the relevant folk psychology is inborn (e.g., Baron-Cohen 1995), while others claim that it is acquired (Gopnik 1993). In contrast, ST holds that we understand others by means of simulation (e.g., Goldman 2006), where simulation can take place at two levels, referred to as low-level and high-level simulation (Goldman 2006). In recent years, however, it has become clear that both positions have significant limitations. One central problem is claimed to be that both TT and ST take a primarily observational stance towards the other when analysing understanding:[1] critics maintain that this observational stance is a nonstandard, intellectual perspective, and that in fact we are normally involved in interaction when we try to understand others. Developing this line of thought, Gallagher’s interaction theory (2001) combines involvement in interaction with a direct perception thesis, such that we can directly perceive the mental states of others and do not have to infer them. Another alternative proposal is Hutto’s narrative account of social understanding (2008), on which understanding others relies centrally on telling or understanding stories. These idealized positions are the bases for a wide range of mixed positions, with which I will engage shortly. Yet even if we consider only these idealized positions, a new central defect quickly becomes clear: namely, that these positions offer answers to rather different questions. Thus, in a first step, I aim to reorganize the field of the main positions and use this framework to situate my own view, which I refer to as the person model theory (Newen & Schlicht 2009; Newen & Vogeley 2011): this account is characterized by the claim that we understand others by essentially relying on person models of individuals, or of groups.