In studies of war and terrorism, an exclusive focus on action misses an important and logically prior stage of constitutive thinking and discursive contestation. Particularly in ambiguous contexts, which states often face when waging conflict against nonstate actors such as terrorist organizations, how the situation is defined is a key to understanding state decision making and action. This paper employs symbolic interactionist theory to analyze the process of defining situations under ambiguity. It argues that how different domestic actors develop preferences for definitions depends on (i) the kind of situational parameters that they monitor as part of their group perspective, (ii) the availability of historical analogies, and (iii) (role)‐identity and self‐esteem needs, namely the legitimation of actors' claimed identity through an effective role performance. These ideas are examined in a case study of Israeli understanding of and response to Hizbollah's attack of July 12, 2006, which developed into the 2006 Lebanon War (known in Israel as the Second Lebanon War).