For almost two decades, the poor performance observed with the so-called Director task has been interpreted as evidence of limited use of Theory of Mind in communication. Here we propose a probabilistic model of common ground in referential communication that derives three inferences from an utterance: what the speaker is talking about in a visual context, what she knows about the context, and what referential expressions she prefers. We tested our model by comparing its inferences with those made by human participants and found that it closely mirrors their judgments, whereas an alternative model compromising the hearer’s expectations of cooperativeness and efficiency reveals a worse fit to the human data. Rather than assuming that common ground is fixed in a given exchange and may or may not constrain reference resolution, we show how common ground can be inferred as part of the process of reference assignment.