In one-level versions of DRT, a single set of rules is used to obtain the semantic contribution of a sentence. To take a simple example, if the sentence is “It is grey”, the first rule to apply will say that the semantic correlate of the subject is an argument to the predicate expressed by “is grey”. Then the two main parts of the sentence are analysed further, and the pronoun “it” triggers a rule which at once deals with the pronoun’s lexical content and its context dependence; i.e., it says that we must select a new discourse referent, link it to a discourse referent made available by the preceding discourse, and update the DRS so as to record these changes. In two-level versions of DRT there is no such rule. Its duties are divided between two separate mechanisms. In the first stage, a separate DRS is constructed for the sentence, in which pronouns prompt the introduction of new discourse referents that are marked as being anaphoric (we use underlining for this purpose). In the second stage, there is a general mechanism for dealing with discourse referents thus marked.