The aim of the present study was to assess the ability of children and adolescents with Asperger syndrome (AS) (N = 21) to infer physical versus mental states on a new 'advanced' test of theory-of-mind - Stories from Everyday Life. The participants in the AS group were of normal intelligence and were compared with an age-matched control group (N = 20) of normally developing children and adolescents. The test materials comprised 26 short stories or 13 pairs of different types of stories. This contextually complex theory-of-mind battery aimed to record the participants' ability to make inferences about physical as well as mental states. The first part of each story described a physical or mechanical event, and a test question then tested the participants' ability to make an inference about a physical state. The last part of the stories contained two questions, testing the ability to infer a mental state from the story context, e.g., understanding social communication such as a lie, white lie, figure of speech, misunderstanding, double bluff, irony, persuasion, contrary emotions, forgetting, jealousy, intentions, empathy and social blunders. The participants' reaction time and number of prompt questions were also recorded. The participants in the AS group showed significantly more problems attributing mental state inferences relative to the control group. They performed considerably better on tasks involving a physical state, but still did less well than the controls. They had a tendency to interpret behaviour and utterances literally, without regard to context, and to choose a physical explanation when a mental state answer was more appropriate. They also needed significantly more prompt questions and used significantly more time than the controls to solve the tasks, especially those involving mental state inference. This study supports earlier findings that individuals with AS/HFA have difficulties attributing mental states in context, but seem to have significantly fewer difficulties inferring physical states. The fact that the clinical group also used significant longer reaction time and needed significantly more prompt questions to solve the tasks relative to the control group may also be related to their problems in understanding mental states. However, the possibility remains that these difficulties could represent a separate factor - or a distinct 'cognitive style'- suggesting that at least some individuals with AS may be generally slow in solving cognitive tasks.