Typically developing children understand and predict others' behavior by extracting and processing relevant information such as the logic of their actions within the situational constraints and the intentions conveyed by their gaze direction and emotional expressions. Children with autism have difficulties understanding and predicting others' actions. With the use of eye tracking and behavioral measures, we investigated action understanding mechanisms used by 18 children with autism and a well-matched group of 18 typically developing children. Results showed that children with autism (a) consider situational constraints in order to understand the logic of an agent's action and (b) show typical usage of the agent's emotional expressions to infer his or her intentions. We found (c) subtle atypicalities in the way children with autism respond to an agent's direct gaze and (d) marked impairments in their ability to attend to and interpret referential cues such as a head turn for understanding an agent's intentions. (Contains 1 table and 7 figures.)