Functional counterfactual thinking involves a unique set of circumstances where one can both reflect on past events and imagine future possibilities. A key aspect of a counterfactual's functionality is that insight about past mistakes is converted into plans for future action, thereby improving self-regulatory success. If counterfactual thinking is a self-regulatory tool, then it should be similarly impacted by psychological mechanisms that influence peoples' ability to improve future outcomes. The current research tested one such mechanism, psychological distance. Using a sequential priming paradigm, Experiment 1 showed that functional counterfactual thinking is sensitive to changes in temporal distance. Negative events in the recent versus distant past facilitated relevant behavioral intention judgments. Additionally, functional counterfactual thinking was sensitive to changes in the relevant behavioral intention's temporal distance, such that counterfactual judgments facilitated behavioral intentions set to occur in the near but not distant future (Experiment 2). Together, this research creates new connections between functional counterfactual thinking and psychological distance. Copyright (C) 2012 John Wiley & Sons, Ltd.