In this paper I present an interpretation of J. G. Fichte's transcendental argument for the necessity of mutual recognition (Anerkennung) in Foundations of Natural Right. Fichte's argument purports to show that, as a condition of the possibility of self-consciousness, we must take ourselves to stand in relations of mutual recognition with other agents like ourselves. After reconstructing the steps of Fichte's argument, I present what I call the ‘modal dilemma’, which highlights a serious ambiguity in Fichte's deduction. According to the modal dilemma, the conclusion to Fichte's transcendental argument—that as a condition of the possibility of our self-consciousness, we must recognize and be recognized by others—expresses either metaphysical or normative necessity. However, no normative conclusion follows from Fichte's premises, and the metaphysical claim that does follow from his argument appears to be implausibly strong. Thus the argument looks like a failure on either interpretation of the conclusion's modality. In the penultimate section of the paper, I propose a new interpretation of the argument that avoids the modal dilemma and provides a normative grounding of Fichte's concept of right.