Humans are a social species and much of what we know we learn from others. To be effective and efficient learners, children must be selective about when to innovate, when to imitate, and to what degree. In a systematic program of interdisciplinary, mixed-methodological, and cross-cultural research, my objective is to develop an ontological account of how children flexibly use imitation and innovation as dual engines of cultural learning. Imitation is multifunctional; it is used to learn both instrumental skills and cultural conventions such as rituals. I propose that the psychological system supporting the acquisition of instrumental skills and cultural conventions is driven by two modes of interpretation: an instrumental stance (i.e., interpretation based on physical causation) and a ritual stance (i.e., interpretation based on social convention). What distinguishes instrumental from conventional practices often cannot be determined directly from the action alone but requires interpretation by the learner based on social cues and contextual information. I will present evidence for the kinds of information children use to guide flexible imitation. I will also discuss cross-cultural research in the U.S. and Vanuatu (a Melanesian archipelago) on the interplay of imitation and innovation in early childhood.