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The transactional interpretation of quantum mechanics (TIQM) takes the psi and psi* wave functions of the standard quantum formalism to be retarded (forward in time) and advanced (backward in time) waves that form a quantum interaction as a Wheeler–Feynman handshake or transaction. It was first proposed in 1986 by John G. Cramer, who argues that it helps in developing intuition for quantum processes. He also suggests that it avoids the philosophical problems with the Copenhagen interpretation and the role of the observer, and also resolves various quantum paradoxes. TIQM formed a minor plot point in his science fiction novel Einstein's Bridge.

More recently, he has also argued TIQM to be consistent with the Afshar experiment, while claiming that the Copenhagen interpretation and the many-worlds interpretation are not. The existence of both advanced and retarded waves as admissible solutions to Maxwell's equations was explored in the Wheeler–Feynman absorber theory. Cramer revived their idea of two waves for his transactional interpretation of quantum theory. While the ordinary Schrödinger equation does not admit advanced solutions, its relativistic version does, and these advanced solutions are the ones used by TIQM.

In TIQM, the source emits a usual (retarded) wave forward in time, but it also emits an advanced wave backward in time; furthermore, the receiver, who is later in time, also emits an advanced wave backward in time and a retarded wave forward in time. A quantum event occurs when a "handshake" exchange of advanced and retarded waves triggers the formation of a transaction in which energy, momentum, angular momentum, etc. are transferred. The quantum mechanism behind transaction formation has been demonstrated explicitly for the case of a photon transfer between atoms in Sect. 5.4 of Carver Mead's book Collective Electrodynamics. In this interpretation, the collapse of the wavefunction does not happen at any specific point in time, but is "atemporal" and occurs along the whole transaction, and the emission/absorption process is time-symmetric. The waves are seen as physically real, rather than a mere mathematical device to record the observer's knowledge as in some other interpretations of quantum mechanics. Philosopher and writer Ruth Kastner argues that the waves exist as possibilities outside of physical spacetime and that therefore it is necessary to accept such possibilities as part of reality.

Cramer has used TIQM in teaching quantum mechanics at the University of Washington in Seattle.

Advances over previous interpretations