This paper revisits the classic distinction between rules and principles in legal theory and offers a conceptual clarification grounded in possible worlds semantics. While both are legal norms, they function at different levels of ideality and perform distinct roles within a legal system. Rules are treated as conditional normative propositions that describe the “second-best world” — a legally acceptable state slightly better than the actual world. They prescribe specific actions under particular conditions and are essential for institutional decision-making and legal certainty. Principles, by contrast, are unconditional normative propositions that describe the “best possible world” from the perspective of the actual one. They set aspirational standards that legal rules should approximate. Importantly, these principles are not merely moral ideals external to law; they are internal components of the legal system itself. Why must principles be included within a legal system? The answer lies in the assumptions of consistency and completeness that underpin any legal order. Without principles, the system lacks internal consistency and normative guidance in hard cases. Principles serve to resolve conflicts, fill normative gaps, and justify the application and development of rules. Thus, they are indispensable for understanding the law not merely as a set of enacted norms but as a rational, evolving structure capable of responding to complex situations. Formally, rules may be expressed as O(p → q), while principles take the form OOp. This layered structure reveals how rules are derived from and constrained by principles within a dynamic normative framework. This paper thereby contributes to the clarification of legal reasoning by explaining how the rule–principle distinction supports both the operational function and the normative integrity of legal systems.