This thesis investigates whether differences in grammatical person cause differences in how written discourse is processed, imagined, or understood. Literary theorists, narratologists, and authors have often debated how much difference the grammatical person of a story makes in the telling of that story. Despite an early trend towards arguing that grammatical person per se must matter in fundamental ways, more recent theorists, carefully disentangling grammatical person from other devices such as point of view, suggest it might not matter at all. Psychology has not directly addressed the issue, but provides research on language in general, and on situation models in particular, that tells us how we might think about the possible role of grammatical person. I discuss the relevant research from psychology, and then review what literary theorists have long been arguing about grammatical person. I then detail a series of experiments in which I test for differences in how a text is processed, based on whether it is written in the first- or third-person. These studies focus on how use of the first-person shifts the perspective people take of internal spatial situation models of narrative scenes. Results indicate a first-person text will be imagined differently than the same text written in the third-person. Specifically, first-person texts encourage people to consider story-scenes from the viewpoint of a character within the story-world. I conclude with a summary of the findings, their broader relevance, and what I see as fruitful future areas of research.