Recent research on the acquisition of knowledge about the important and pervasive appearance-reality distinction suggests the following course of development. Many 3-year-olds seem to possess little or no understanding of the distinction. They fail very easy-looking tests of this understanding and are unresponsive to training. At this age level, skill in solving simple appearance-reality tasks is highly correlated with skill in solving simple visual perspective-taking tasks. This and other findings are consistent with the hypothesis that what helps children finally grasp the distinction is an increased cognizance of the fact that people are sentient subjects who have mental representations of objects and events. It does so by allowing them to understand that the selfsame stimulus can be mentally represented in two different, seemingly contradictory ways:(a) in the appearance-reality case, how it appears to the self versus how it really is; and (b) in the perspective-taking case, how it presently appears to self versus other. In contrast to young preschoolers, children of 6 to 7 years manage simple appearance-reality tasks with ease. However, they have great difficulty reflecting on and talking about such appearance-reality notions as “looks like,”“really and truly,” and especially,“looks different from the way it really and truly is.” Finally, children of 11 to 12 years, and to an even greater degree college students, give evidence of possessing a substantial body of rich, readily available, and explicit knowledge in this area.