This article critically reviews psychological and linguistic research on counterfactual reasoning, with a focus on Chinese. It challenges strong Whorfian claims that language determines thought, emphasizing instead the interplay between universal cognitive abilities and cultural constraints. While the psychological mechanisms of counterfactual reasoning demonstrate broad cross-cultural consistency, cultural norms of relevance constrain speakers’ readiness to entertain counterfactual scenarios. Furthermore, the linguistic representations of counterfactual thought vary across languages in how key semantic ingredients are grammatically organized. Chinese counterfactual constructions routinely convey affective stance and moral reasoning in everyday use. Historical evidence from premodern Chinese vernacular texts supports the indigenous origins of counterfactual expressions in Chinese, demonstrating that Chinese speakers have long engaged in such reasoning.