Reducing prejudice is a critical research agenda, and never before has counterfactual priming been evaluated as a potential prejudice-reduction strategy. In the present experiment, participants were randomly assigned to imagine a pleasant interaction with a homosexual man and then think counterfactually about how an incident of sexual discrimination against him might not have occurred (experimental condition) or to imagine a nature scene (control condition). Results demonstrated a significant reduction in sexual prejudice from baseline levels in the counterfactual simulation group. Importantly, whereas intergroup anxiety and motivation to control prejudice were not predictive factors, number of counterfactual thoughts generated independently predicted variance in prejudice reduction. Mechanisms for, and implications of, prejudice-reduction strategies including counterfactual thinking are discussed.