The revelation principle is a fundamental principle in mechanism design. It states that if a social choice function can be implemented by an arbitrary mechanism (i.e. if that mechanism has an equilibrium outcome that corresponds to the outcome of the social choice function), then the same function can be implemented by an incentive-compatible-direct-mechanism (i.e. in which players truthfully report type) with the same equilibrium outcome (payoffs).^{: 224–225}

In mechanism design, the revelation principle is of utmost importance in finding solutions. The researcher need only look at the set of equilibria characterized by incentive compatibility. That is, if the mechanism designer wants to implement some outcome or property, they can restrict their search to mechanisms in which agents are willing to reveal their private information to the mechanism designer that has that outcome or property. If no such direct and truthful mechanism exists, no mechanism can implement this outcome/property by contraposition. By narrowing the area needed to be searched, the problem of finding a mechanism becomes much easier.

The principle comes in two variants corresponding to the two flavors of incentive-compatibility:

• The dominant-strategy revelation-principle says that every social-choice function that can be implemented in dominant-strategies can be implemented by a dominant-strategy-incentive-compatible (DSIC) mechanism (introduced by Allan Gibbard).
• The Bayesian-Nash revelation-principle says that every social-choice function that can be implemented in Bayesian-Nash equilibrium (Bayesian game, i.e. game of incomplete information) can be implemented by a Bayesian-Nash incentive-compatibility (BNIC) mechanism. This broader solution concept was introduced by Dasgupta, Hammond and Maskin, Holmstrom, and Myerson.