Adopting a functional perspective that views grammar as a rich resource for making contextualized meanings in a culture- and language-specific way, the article reconsiders the role of explicit grammar instruction in developing communicative abilities of second language learners. It draws on two distinct but complementary research frameworks, Systemic Functional Linguistics and Cognitive Linguistics, and on their conceptualization of grammar as a semiotic tool that serves the functions it is called on to perform in a speech community and is shaped by a variety of historical, social, and biological factors. The article delineates pedagogical principles of functionally based grammar instruction and illustrates them by providing suggestions on how to teach two notoriously complex phenomena in German: clausal dative case and past tenses. It advocates presenting grammatical phenomena in the context of an entire text and creating a metalinguistic awareness that enables learners to make situationally appropriate linguistic choices consistent with those of native speakers. (Contains 8 notes, 3 figures and 5 excerpts.)