The imagination is central to human social life but undervalued worldwide and underexplored in psychology. Here, we offer Possible Worlds Theory as a synthetic theory of the imagination. We first define the imagination, mapping the mental states it touches, from dreams and hallucinations to satire and fiction. The conditions that prompt people to imagine range from trauma to physical and social deprivation, and they challenge the sense of reality, stirring a need to create possible worlds. We theorize about four cognitive operations underlying the structure of the mental states of the imagination. We then show how people embody the imagination in social behaviors such as pretense and ritual, which give rise to experiences of a special class of feelings defined by their freedom from reality. We extend Possible Worlds Theory to four domains—play, spirituality, morality, and art—and show how in flights of the imagination people create new social realities shared with others.