The basic functions of the ego, which are control of perception, of motility, of memory and learning are not created by the instinctual needs; they are only developed under their influence. The process of id-ego differentiation originates in the infant's body, and no environment exists until the self as a 'me' experience has come into existence. The body attains a special position among other objects in the world of perception. Instinct and ego maturation is also reflected in body-ego maturation. In spite of the environment's efforts (mother) there arise in infancy situations which amount to a loss of the feeling of self. It has to be recreated again as in the acts of awakening from sleep. Negative hallucination which preceeds the wish-fulfilling hallucinatory processes is discussed; also trauma and anxiety in relation to the formation of the earliest object relations.