An ageing population with increased social care needs has provided recent impetus for research into assisted living technologies, as the need for different approaches to providing supportive environments for senior citizens becomes paramount. Ambient intelligence (AmI) systems are already contributing to this endeavour. A key feature of future AmI systems will be the ability to identify causes and explanations for changes to the environment, in order to react appropriately. We identify some of the challenges that arise in this respect, and argue that an iterative and distributed approach to explanation generation is required, interleaved with directed data gathering. We further argue that this can be realised by developing and combining state-of-the art techniques in automated distributed reasoning, activity recognition, robotics, and knowledge-based control.