Younger and older adults differ in performance on a range of social-cognitive skills, with older adults having difficulties in decoding nonverbal cues to emotion and intentions. Such skills are likely to be important when deciding whether someone is being sarcastic. In the current study we investigated in a life span sample whether there are age-related differences in the interpretation of sarcastic statements. Using both video and verbal materials, 116 participants aged between 18 and 86 completed judgments about whether statements should be interpreted literally or sarcastically. For the verbal stories task, older adults were poorer at understanding sarcastic intent compared with younger and middle-aged participants, but there was no age difference in interpreting control stories. For the video task, older adults showed poorer understanding of sarcastic exchanges compared with younger and middle-aged counterparts, but there was no age difference in understanding the meaning of sincere interactions. For the videos task, the age differences were mediated by the ability to perceive facial expressions of emotion. Age effects could not be explained in terms of variance in working memory. These results indicate that increased age is associated with specific difficulties in using nonverbal and contextual cues to understand sarcastic intent.