Gossip – a sender communicating to a receiver about an absent target – is hypothesized to impact reputation formation, partner selection, and cooperation. Lab experiments have found that people communicate about others’ cooperativeness via gossip and that they use such information to condition their own cooperation. Here, we move beyond the lab and test several predictions from a theory of indirect reciprocity about the content of gossip in daily life and its use in updating the reputations of others in a social network. In a community sample (N = 309), we used intensive experience sampling techniques for 10 days to randomly sample daily events (k = 5,154) in which people either sent or received gossip. We found that senders very often gossip about multiple dimension closely linked to targets’ cooperativeness (e.g., trustworthiness, warmth, and norm violations), and that senders gossiped in a way that minimizes the possibility of retaliation from the target (e.g., gossiping to highly valued partners, who share a less valued relationship with the target). When considering received gossip, we found that receivers overwhelmingly believed gossip to be true and that receivers used gossip to update the cooperative reputation of others. In turn, a positive (versus negative) shift in a gossip targets’ reputation related to higher (lower) intentions to help (avoid) them in future interactions. Thus, gossip is used in daily life to efficiently impose reputational costs and benefits, and people update reputations based on this gossip in a way that influences partner selection and indirect reciprocity.