The ability to localize moving joints of a person in action is crucial for interacting with other people in the environment. However, it remains unclear how the visual system encodes the position of joints in a moving body. We used a paradigm based on a well-known phenomenon, the flash-lag effect, to investigate the mechanisms underlying joint localization in bodily movements. We first found that observers perceived a strong flash-lag effect in biological motion: when a briefly-flashed dot was presented physically in perfect alignment with a continuously moving limb, the flash dot was perceived to lag behind the position of the moving joint. Importantly, our study revealed that for familiar forward walking actions, the strength of the flash-lag effect for a joint depends on body orientation. Specifically, observing a walker with a natural body orientation (i.e., upright) yielded a significantly stronger flash-lag effect for the critical foot joint than did viewing an inverted walker. In contrast, the hand joint showed a weaker flash-lag effect in the upright walker than the inverted walker. These findings suggest that the impact of body orientation on encoding joint locations depended on body part. Furthermore, we found that action familiarity modulates the impact of body orientation on the flash-lag effect. Body orientation impacted location encoding in familiar forward walking actions, but not in unfamiliar actions (e.g., backward walking, jumping-jack). Simulation results showed that generic motion mechanisms, such as the temporal averaging model, cannot fully account for these empirical findings regarding the flash-lag effect in biological motion. The present study provides compelling evidence that action processing interacts with position processing to localize the moving joints in whole-body actions, and that this influence depends on body orientation and familiarity of actions.