Drawing on Peter Szondi’s seminal ‚Introduction to Literary Hermeneutics‘, the present article tries to assess the significance of hermeneutics for a theoretically oriented literary analysis. Far from being outdated by structuralist and deconstructivist criticism, the hermeneutic approach is of fundamental importance to the study of literature. But instead of conceiving the process of understanding in vast and universal terms, as Dilthey and Gadamer have done, we need to include an element of restriction within the hermeneutic operation itself, a dialectics of understanding and non-understanding. In accord with Szondi we therefore plead for a mode of literary hermeneutics which combines philology and philosophy while at the same time reflecting on its own limits and possibilities.