[Correction Notice: An Erratum for this article was reported in Vol 115(6) of Journal of Personality and Social Psychology (see record 2018-63189-002). In the article, the original supplemental material has been revised to include a clarifying note to the Tests of model fit over larger sample (Samples C-G) section and post-peer review analyses added to the Post-peer review Factor Analytic Tests section. All versions of this article have been corrected.] Philosophers and behavioral scientists refer to wisdom as unbiased reasoning that guides one toward a balance of interests and promotes a good life. However, major instruments developed to test wisdom appear biased, and it is unclear whether they capture balance-related tendencies. We examined whether shifting from global, de-contextualized reports to state-level reports about concrete situations provides a less biased method to assess wise reasoning (e.g., intellectual humility, recognition of uncertainty and change, consideration of the broader context at hand and perspectives of others, integration of these perspectives or compromise), which may be aligned with the notion of balancing interests. Results of a large-scale psychometric investigation (N = 4,463) revealed that the novel Situated WIse Reasoning Scale (SWIS) is reliable and appears independent of psychological biases (attribution bias, bias blind spot, self-deception, and impression management), whereas global wisdom reports are subject to such biases. Moreover, SWIS scores were positively related to indices of living well (e.g., adaptive emotion regulation, mindfulness), and balancing of cooperative and self-protective interests, goals (influence-vs.-adjustment), and causal inferences about conflict (attribution to the self-vs.-other party). In contrast, global wisdom reports were unrelated or negatively related to balance-related measures. Notably, people showed modest within-person consistency in wise reasoning across situations or over time, suggesting that a single-shot measurement may be insufficient for whole understanding of trait-level wisdom. We discuss theoretical and practical implications for research on wisdom, judgment and decision making, well-being, and prosociality. (PsycINFO Database Record (c) 2018 APA, all rights reserved).