The ability to follow new instructions is crucial for acquiring behaviors and the cultural transmission of performance-related knowledge. In this article, we discuss the observation that successful instruction following seems to require both the capacity to understand verbal information, but also the ability to transform this information into a procedural format. Here we review the behavioral and neuroimaging literature on following new instructions and discuss how it contributes to our understanding of the functional mechanisms underlying instruction following. Based on this review, we distinguish three phases of instruction following. In the instruction phase, the declarative information of the task instruction is transformed into a task model consisting of a structured representation of the relevant condition-action rules. In the implementation phase, elements of this task model are transformed into a highly accessible state guiding behavior. In the application phase, the relevant condition-action rules are applied. We discuss the boundary conditions and capacity limits of these phases, determine their neural correlates, and relate them to recent models of working memory.