The article proposes a theory of event perception, suggesting that the perception of boundaries between events arises from ongoing perceptual processing and regulates attention and memory. The theory posits that perceptual systems continuously make predictions about what will happen next, and when these predictions are transiently violated, an event boundary is perceived. The perception of events depends on both sensory cues and knowledge structures that represent previously learned information about event parts and inferences about actors' goals and plans. Neurological and neurophysiological data suggest that representations of events may be implemented by structures in the lateral prefrontal cortex, and that perceptual prediction error is calculated and evaluated by a processing pathway including the anterior cingulate cortex and subcortical neuromodulatory systems. The theory is supported by psychological data and has implications for understanding how people segment ongoing activity into discrete events, how this segmentation affects memory encoding, and how it is influenced by physical changes and prior knowledge.The article proposes a theory of event perception, suggesting that the perception of boundaries between events arises from ongoing perceptual processing and regulates attention and memory. The theory posits that perceptual systems continuously make predictions about what will happen next, and when these predictions are transiently violated, an event boundary is perceived. The perception of events depends on both sensory cues and knowledge structures that represent previously learned information about event parts and inferences about actors' goals and plans. Neurological and neurophysiological data suggest that representations of events may be implemented by structures in the lateral prefrontal cortex, and that perceptual prediction error is calculated and evaluated by a processing pathway including the anterior cingulate cortex and subcortical neuromodulatory systems. The theory is supported by psychological data and has implications for understanding how people segment ongoing activity into discrete events, how this segmentation affects memory encoding, and how it is influenced by physical changes and prior knowledge.