We want to build animated characters and robots capable of rich social interactions with humans and each other, and who are able to learn by observing those around them. An increasing amount of evidence suggests that, in animals and humans, the ability to learn by watching others, and in particular, the ability to imitate, could be crucial precursors to the development of appropriate social behavior, and ultimately the ability to reason about the thoughts, intents, beliefs, and desires of others. We have created a number of imitative characters and robots, the latest of which is Max T. Mouse, an anthropomorphic animated mouse character who is able to observe the actions he sees his friend Morris Mouse performing, and compare them to the actions he knows how to perform himself. Max’s imitation and social learning system allows him to identify simple goals and motivations for Morris’s behavior, an important step towards developing characters with a full theory of mind. In this paper, we describe the cognitive basis for Max’s social learning capabilities, and explore the implications of our work for future research in both artificial and natural systems.