One of the major problems in natural language understanding by computer is the frequent use of patterned or idiomatic phrases in colloquial English dialogue. Traditional parsing methods typically cannot cope with a significant number of idioms. A more general problem is the tendency of a speaker to leave the meaning of an utterance ambiguous or partially implicit, to be filled in by the hearer from a shared mental context which includes linguistic, social, and physical knowledge. The appropriate representation for this knowledge is a formidable and unsolved problem. We present here an approach to natural language understanding which addresses itself to these problems. Our program uses a series of processing stages which progressively transform an English input into a form usable by our computer simulation of paranoia. Most of the processing stages involve matching the input to an appropriate stored pattern and performing the associated transformation. However, a few key stages perform aspects of traditional parsing which greatly facilitate the overall language recognition process.