Reports a retraction of "Hierarchical encoding of behavior: Translating perception into action" by Bridgette Martin Hard, Sandra C. Lozano and Barbara Tversky (Journal of Experimental Psychology: General, 2006[Nov], Vol 135[4], 588-608). All authors retract this article. Co-author Tversky and co-author Hard believe that the research results cannot be relied upon; Sandra C. Lozano takes full responsibility for the need to retract this article. People encode goal-directed behaviors, such as assembling an object, by segmenting them into discrete actions, organized as goal-subgoal hierarchies. Does hierarchical encoding contribute to observational learning? Participants in 3 experiments segmented an object assembly task into coarse and fine units of action and later performed it themselves. Hierarchical encoding, measured by segmentation patterns, correlated with more accurate and more hierarchically structured performance of the later assembly task. Furthermore, hierarchical encoding increased when participants (a) segmented coarse units first, (b) explicitly looked for hierarchical structure, and (c) described actions while segmenting them. Improving hierarchical encoding always led to improvements in learning, as well as a surprising shift toward encoding and executing actions from the actor's spatial perspective instead of the participants' own. Hierarchical encoding facilitates observational learning by organizing perceived actions into a representation that can serve as an action plan.