We propose a novel cognitively-inspired method to improve and interpret physical simulation in vision-language models. Our ``Chain of Time" method involves generating a series of intermediate images during a simulation, and it is motivated by in-context reasoning in machine learning, as well as mental simulation in humans. Chain of Time is used at inference time, and requires no additional fine-tuning. We apply the Chain-of-Time method to synthetic and real-world domains, including 2-D graphics simulations and natural 3-D videos. These domains test a variety of particular physical properties, including velocity, acceleration, fluid dynamics, and conservation of momentum. We found that using Chain-of-Time simulation substantially improves the performance of a state-of-the-art image generation model. Beyond examining performance, we also analyzed the specific states of the world simulated by an image model at each time step, which sheds light on the dynamics underlying these simulations. This analysis reveals insights that are hidden from traditional evaluations of physical reasoning, including cases where an image generation model is able to simulate physical properties that unfold over time, such as velocity, gravity, and collisions. Our analysis also highlights particular cases where the image generation model struggles to infer particular physical parameters from input images, despite being capable of simulating relevant physical processes.