Background: Speakers use sarcasm to criticize others and to be funny; the indirectness of sarcasm protects the addressee's face (Brown & Levinson, 1987). Thus, appreciation of sarcasm depends on the ability to consider perspectives. Purpose: We investigated development of this ability from late childhood into adulthood and examined effects of interpretive perspective and parties present. Method: We presented 9- to 10-year-olds, 13- to 14-year-olds, and adults with sarcastic and literal remarks in three parties-present conditions: private evaluation, public evaluation, and gossip. Participants interpreted the speaker's attitude and humor from the addressee's perspective and, when appropriate, from the bystander's perspective. Results: Children showed no influence of interpretive perspective or parties present on appreciation of the speaker's attitude or humor. Adolescents and adults, however, shifted their interpretations, judging that addressees have less favorable views of criticisms than bystanders. Further, adolescents and adults differed in their perceptions of the social functions of gossip, with adolescents showing more positive attitudes than adults toward sarcastic gossip. Conclusions: We suggest that adults' disapproval of sarcastic gossip shows a deeper understanding of the utility of sarcasm's face-saving function. Thus, the ability to modulate appreciation of sarcasm according to interpretive perspective and parties present continues to develop in adolescence and into adulthood.