This paper presents a new theory of modal reasoning, i.e. reasoning about what may or may not be the case, and what must or must not be the case. A conclusion is possible if it holds in at least one mental model, whereas it is necessary if it holds in all the models. The theory makes a crucial prediction, which we corroborated experimentally. There is a key interaction: it is easier to infer that a situation is possible as opposed to impossible, whereas it is easier to infer that a situation is not necessary as opposed to necessary.