Other forms: misinterpreted; misinterpreting; misinterprets
When you misinterpret something, you get it wrong. If you misinterpret another driver's wave as a friendly hello, you're probably missing the fact that he's trying to tell you one of your headlights has blown.
Misinterpreting can be fun or embarrassing on a personal level––you can, say, misinterpret a boy's interest in your friend, and think he want to go out with you. But it can be devastating on an international level. During the Cold War, the US and the USSR had to be very careful about sending signals about nuclear readiness––the cost of misinterpreting could be a nuclear war.