This study addresses the role of the possible or virtual in Shakespearean drama. It argues that the possible component constitutes an integral part of Shakespearean drama, and that they are as important as the actual events or component. To underscore its paramount importance, the study stresses two aspects of the possible in Shakespearean drama: its potentiality and its cognitive function. Potentiality highlights the power of the virtual in opening up different meanings and interpretations, suggesting alternative possibilities and creating new storylines out of the original ones. The cognitive function of the virtual or possible underlines its role in rendering the actual events and happenings more intelligible, probable and comprehensible. The study builds on the theoretical framework of possible worlds theory as well as Classical and Renaissance rhetoric; it argues that Shakespeare’s familiarity with and employment of these notions can be attributed to his rhetorical training, which formed an essential part of Elizabethan education. The study deals with the drama both as a fictional story and as theatre. On the level of theatre, it demonstrates that, despite its materiality, theatre must stimulate an imaginary virtual reality if the physical events and happenings onstage are to be fully meaningful. On the level of the fictional story, it shows that virtual or possible events form the beliefs and intentions of characters. They help to set the conflict on track and help the audience to access the characters’ inwardness. Although the possible is thought of as an ontological category, the study highlights its cognitive dimension, and argues that features of the possible even shape our image of the actual past. It addresses this question in relation to the representation of history in Shakespeare’s history plays. Finally, it deals with counterfactual statements in Shakespeare and uses a multidisciplinary approach to study their significance.