Impairments of pretend play are a diagnostic characteristic of autism. This has been interpreted in terms of a generative impairment. Specifically, children with autism are unable to generate the ideas for pretend play despite an intact underlying ability to understand pretence. The notion of a performance deficit affecting production only has, in part, been based upon observations that children with autism appear to have no difficulty understanding pretence. However, research investigating comprehension is somewhat limited and has only investigated a specific type of pretend play, namely pretend properties. The research reported here investigated the ability of children with autism to understand object substitution pretence and pretend gestures (i.e. using no substitutes). Children with autism (N = 36) matched for verbal ability (between 3 and 6 years) with typically developing children (N = 55) and children with moderate learning difficulties (N = 37) were questioned about a series of pretend actions, such as writing. The results revealed three main findings. First, children with autism appear to experience no notable difficulties comprehending functional play. Second, children with autism do encounter difficulties comprehending pretend play. A performance deficit is unable to explain these findings and it is suggested that there may be a more critical impairment in understanding how absent objects are represented. Finally, there was a trend for some kinds of object substitutions and gestures to be more impaired than others. One tentative interpretation is that as the degree of similarity between the referent and the substitute diminishes the representational connection becomes more difficult to understand, particularly when there is a need to inhibit salient but irrelevant cues.