Capacities for abstract thinking, category-formation and problem solving are central to human cognition. Processes of abstraction allow the transfer of experiences and knowledge between contexts helping us make informed decisions in new or changing contexts. While we are often inclined to relate such reasoning capacities to individual minds and brains, they may in fact be contingent on human-specific modes of collaboration, dialogue, and shared attention. In an experimental study, we test the hypothesis that social interaction enhances cognitive processes of abstraction, which in turn improves problem solving performance. Through three sessions of increasing complexity, individuals and groups were presented with a problem-solving task requiring them to categorize a set of visual stimuli. To assess the character of participants’ problem representations, we investigated the extent to which participants generalized observations from known to new stimuli during training sessions. Furthermore, after each training session they were presented with a transfer task involving stimuli that differed in appearance, but shared relations among features with the training set. We found that groups were more likely to correctly generalize their observations during the training sessions and performed superior to individuals in the transfer phase, especially in the high complexity session, suggesting that groups formed more abstract problem representations. Crucially, variation in performance among groups was predicted by semantic diversity in members’ dialogical contributions suggesting a link between social interaction, cognitive diversity, and abstraction.