Does the effectiveness of neural language models derive entirely from accurate modeling of surface word co-occurrence statistics, or do these models represent and reason about the world they describe? In BART and T5 transformer language models, we identify contextual word representations that function as *models of entities and situations* as they evolve throughout a discourse. These neural representations have functional similarities to linguistic models of dynamic semantics: they support a linear readout of each entity’s current properties and relations, and can be manipulated with predictable effects on language generation. Our results indicate that prediction in pretrained neural language models is supported, at least in part, by dynamic representations of meaning and implicit simulation of entity state, and that this behavior can be learned with only text as training data.