Actions are the translation of internal states such as intentions into overt gestures and goals. Actions are communicative, because by observing another’s overt behaviour we can infer that person’s internal states. Infants’ abilities to execute actions are limited by developing motor processes. Their capacity to make inferences from others’ behaviour is hindered by their inability to engage in perspective-taking and other advanced social cognitive processes. Nonetheless, extensive evidence shows that infants perceive actions as goal-directed sequences that are meaningful, and that they respond to observed actions with motor resonance. The aims of this thesis were to determine how semantic and motor processing of observed action develop in infancy, whether these processes develop separately or in conjunction with one another, and how infants’ abilities to execute and plan actions affects ability to detect semantic and motor differences between actions. These aims were achieved by studying how infants processed grasping actions that varied on different dimensions. In Chapter 1, the literature on infant action perception from social, motor and semantic perspectives is reviewed and the objectives of the thesis are described. In Chapter 2, the ability of 16-month-olds to discriminate between the uses of a novel tool when motor simulation processes are uninformative was investigated. In Chapter 3, the attentional and semantic neural correlates of processing of observed grasps were measured in 9-month-olds, 11.5-month-olds, and adults. In Chapter 4, motor activation in 10-month-old infants in response to motorically similar but semantically distinct grasping actions was related to infants’ action planning skills. The results of these experiments show that there is a complex interplay between motor and semantic constituents of the action processing system, and that this interplay is developmentally dynamic. The implications of the results for understanding action processing in development are considered in Chapter 5.