We develop a theory of internal commitments or “personal rules” based on self‐reputation over one’s willpower, which transforms lapses into precedents that undermine future self‐restraint. The foundation for this mechanism is the imperfect recall of past motives and feelings, leading people to draw inferences from their past actions. The degree of self‐control an individual can achieve is shown to rise with his self‐confidence and decrease with prior external constraints. On the negative side, individuals may adopt excessively rigid rules that result in compulsive behaviors such as miserliness, workaholism, or anorexia. We also study the cognitive basis of self‐regulation, showing how it is constrained by the extent to which self‐monitoring is subject to opportunistic distortions of memory or attribution, and how rules for information processing can themselves be maintained.