Updating self-related rules and beliefs is a common process in psychotherapy. Surprisingly, little is known about the psychological mechanisms underlying belief and rule updating. In this theoretical review, which links the gap between cognitive, behavioral (learning), and computational sciences, we propose a multiple propositional theory for understanding belief and rule updating. The multiple propositional theory posits that individuals generate propositions for understanding current experiences and environments. These propositions compete with each other and are selected to reduce prediction errors in light of an individual’s current and past experiences. A focal proposition can be updated by the Bayesian rule in principle, but a large prediction error encourages the generation of new propositions. This theory highlights the importance of generating propositions and hypothetical thinking in therapeutic processes and facilitates the understanding of clinical observations and techniques. We provide a way to compute this theory and discuss research topics derived therefrom.