To engage with the world—to understand the scene in front of us, plan actions, and predict what will happen next—we must have an intuitive grasp of the world’s physical structure and dynamics. How do the objects in front of us rest on and support each other, how much force would be required to move them, and how will they behave when they fall, roll, or collide? Despite the centrality of physical inferences in daily life, little is known about the brain mechanisms recruited to interpret the physical structure of a scene and predict how physical events will unfold. Here, in a series of fMRI experiments, we identified a set of cortical regions that are selectively engaged when people watch and predict the unfolding of physical events—a “physics engine” in the brain. These brain regions are selective to physical inferences relative to nonphysical but otherwise highly similar scenes and tasks. However, these regions are not exclusively engaged in physical inferences per se or, indeed, even in scene understanding; they overlap with the domain-general “multiple demand” system, especially the parts of that system involved in action planning and tool use, pointing to a close relationship between the cognitive and neural mechanisms involved in parsing the physical content of a scene and preparing an appropriate action.