Theories of children's developing understanding of mind tend to emphasize either individualistic processes of theory formation, maturation, or introspection, or the process of enculturation. However, such theories must be able to account for the accumulating evidence of the role of social interaction in the development of social understanding. We propose an alternative account, according to which the development of children's social understanding occurs within triadic interaction involving the child's experience of the world as well as communicative interaction with others about their experience and beliefs (Chapman 1991; 1999). It is through such triadic interaction that children gradually construct knowledge of the world as well as knowledge of other people. We contend that the extent and nature of the social interaction children experience will influence the development of children's social understanding. Increased opportunity to engage in cooperative social interaction and exposure to talk about mental states should facilitate the development of social understanding. We review evidence suggesting that children's understanding of mind develops gradually in the context of social interaction. Therefore, we need a theory of development in this area that accords a fundamental role to social interaction, yet does not assume that children simply adopt socially available knowledge but rather that children construct an understanding of mind within social interaction.