This chapter deals with what to date has been the most neglected aspect of Lipps’s oeuvre: his theoretical research on language, conceived as the manifestation of a psychological function to be explained in mentalistic terms. As I demonstrate, Lipps was a major and highly innovative language theorist at the intersection of linguistics, the philosophy of language, and the aesthetics of language. For the first time, I discuss at length the two issues that are at the core of the Lippsian theory of language: semiotics and the study of the role of empathy in language processes. Regarding Lipps’s contribution to semiotics, I show that he was an early theorist of the linguistic sign, who interpreted semiotic experience at different times as a phenomenon of either “judgment,” “symbolism,” or “comprehension.” Regarding his contribution to the place of empathy in language, I highlight the richness of his pioneering investigations on the topic, namely, his early research on the anthropomorphic dimension of language, his reflections on the ubiquitousness of empathy in the experience of language, his discussion of the role of empathy in linguistic intercomprehension, and his analysis of how we empathize with the narrative content of statements.