The convergence of theory and research on socially shared cognition represents a promising new direction for understanding how to enhance the intellectual growth of individuals. In this presentation, we outline how principles of situated cognition and Vygotskian thought contribute to our understanding of how to create vibrant and authentic on-line communities of practice. These principles apply equally to traditional educational settings and on-line communities. The view advanced here is that web-based learning is a potentially good vehicle for the creation of a community of learners if it is designed according to the principles for community building outlined in the present study and other related research. The Master of Educational psychology (MEdPsych) on-line community at Massey University is presented and analysed in terms of the community of practice theoretical framework. The concept of a "collective zone of proximal development" (czpd) is introduced to explain how cognitive growth progressively occurs for community members who are operating within a socially interactive and reflective learning environment. Finally, principles and recommendations are offered on how to design communities so that all individuals can achieve their optimal functioning level through guided social participation.