This chapter examines the relationship between mental state reasoning skills and imagination; specifically how and why children who create imaginary companions (ICs) differ in these skills from children who do not have imaginary playmates. This chapter introduces mental state reasoning, and explains its links to imagination and other variables, while exploring how this construct is measured. It then moves on to investigate IC play and consider how a child’s creation of a pretend mind is thought to improve his or her ability to reason about real minds. The chapter also includes a short history of the imaginary companion, as well as an overview of how science has viewed this construct, a clarification of what type of play is classified as IC play, and which groups of children might be more likely to play with these entities. Toward the end of the chapter, research on mental state reasoning and IC status is reviewed, and theoretical viewpoints on why these children excel in mental state reasoning are laid out. The chapter closes with a discussion of future explorations for this field in terms of causal direction and new forms of therapeutic play intervention.