Being able to generate predictions about what is going to happen next while observing other people’s actions plays a crucial role in our daily lives. Different theoretical explanations for the underlying processes of humans’ action prediction abilities have been suggested. Whereas an embodied account posits that predictive gaze relies on embodied simulations in the observer’s motor system, other accounts do not assume a causal role of the motor system for action prediction. The general aim of this thesis was to augment current knowledge about the functional mechanisms behind humans’ action prediction abilities. In particular, the present thesis outlines and tests an embodied account of action prediction. The second aim of this thesis was to extend prior action prediction studies by exploring infants’ online gaze during observation of social interactions. The thesis reports 3 eye-tracking studies that were designed to measure adults’ and infants’ predictive eye movements during observation of different manual and social actions. The first two studies used point-light displays of manual reaching actions as stimuli to isolate human motion information. Additionally, Study II used transcranial magnetic stimulation (TMS) to directly modify motor cortex activity. Study I showed that kinematic information from biological motion can be used to anticipate the goal of other people’s point-light actions and that the presence of biological motion is sufficient for anticipation to occur. Study II demonstrated that TMS-induced temporary lesions in the primary motor cortex selectively affected observers’ gaze latencies. Study III examined 12-month-olds’ online gaze during observation of a give-and-take interaction between two individuals. The third study showed that already at one year of age infants shift their gaze from a passing hand to a receiving hand faster when the receiving hand forms a give-me gesture compared to an inverted hand shape. The reported results from this thesis make two major contributions. First, Studies I and II provide evidence for an embodied account of action prediction by demonstrating a direct connection between anticipatory eye movements and motor cortex activity. These findings support the interpretation that predictive eye movements are driven by a recruitment of the observer’s own motor system. Second, Study III implicates that properties of social action goals influence infants’ online gaze during action observation. It further suggests that at one year of age infants begin to show sensitivity to social goals within the context of give-and-take interactions while observing from a third-party perspective.