Humans often make decisions based on uncertain sensory information. Signal detection theory (SDT) describes detection and discrimination decisions as a comparison of stimulus “strength” to a fixed decision criterion. However, recent research suggests that current responses depend on the recent history of stimuli and previous responses, suggesting that the decision criterion is updated trial-by-trial. The mechanisms underpinning criterion setting remain unknown. Here, we examine how observers learn to set a decision criterion in an orientation-discrimination task under both static and dynamic conditions. To investigate mechanisms underlying trial-by-trial criterion placement, we introduce a novel task in which participants explicitly set the criterion, and compare it to a more traditional discrimination task, allowing us to model this explicit indication of criterion dynamics. In each task, stimuli were ellipses with principal orientations drawn from two categories: Gaussian distributions with different means and equal variance. In the covert-criterion task, observers categorized a displayed ellipse. In the overt-criterion task, observers adjusted the orientation of a line that served as the discrimination criterion for a subsequently presented ellipse. We compared performance to the ideal Bayesian learner and several suboptimal models that varied in both computational and memory demands. Under static and dynamic conditions, we found that, in both tasks, observers used suboptimal learning rules. In most conditions, a model in which the recent history of past samples determines a belief about category means fit the data best for most observers and on average. Our results reveal dynamic adjustment of discrimination criterion, even after prolonged training, and indicate how decision criteria are updated over time.