This article offers a psychoanalytic reading of Henry James's well-known ghost story, The Turn of the Screw, an ambiguous and fascinating tale narrated by a young governess put in sole charge of two orphan children. Henry James was an early modernist in the sense that he required his readers to think about his text and interpret it for themselves. In this tale he engages the reader's interest in haunting in the story and in general, and raises the question of where ghosts are to be found: in inner or in outer reality? The ghosts of the tale have intense relationships and interchanges with some of the living characters, and the article suggests that the ‘ghosts’ may be understood as the characters' split-off and projected experiences of loss. These return to haunt them, in spite of their strenuous efforts to defend themselves against the pain of bereavement and loss of omnipotence. As James says, the presence of the children in the story makes more poignant the return of the uncontained projections in the form of nameless dread.