Two experiments investigated whether infants represent goal-directed actions of others in a way that allows them to draw inferences to unobserved states of affairs (such as unseen goal states or occluded obstacles). We measured looking times to assess violation of infants' expectations upon perceiving either a change in the actions of computer-animated figures or in the context of such actions. The first experiment tested whether infants would attribute a goal to an action that they had not seen completed. The second experiment tested whether infants would infer from an observed action the presence of an occluded object that functions as an obstacle. The looking time patterns of 12-month-olds indicated that they were able to make both types of inferences, while 9-month-olds failed in both tasks. These results demonstrate that, by the end of the first year of life, infants use the principle of rational action not only for the interpretation and prediction of goal-directed actions, but also for making productive inferences about unseen aspects of their context. We discuss the underlying mechanisms that may be involved in the developmental change from 9 to 12 months of age in the ability to infer hypothetical (unseen) states of affairs in teleological action representations. (C) 2002 Cognitive Science Society, Inc. All rights reserved.