In this paper, the concept of reality and psychic reality are discussed in relationship to a number of controversies about the therapeutic and scientific aims of psychoanalysis, as illustrated by the disagreement between Freud and Ferenczi. Because the nature of psychic reality is necessarily incomplete and indeterminate, there are inherent limitations and dangers to any psychoanalytic attempt to discover historical and experiential truth. Modell's interpretation of Nachträglichkeit ('deferred action') as 'retranscription' expresses the ambiguity of psychic reality in analysis, which is not fixed or foundational but part of an evolving inner and outer dialogue in relation to new experience. It is argued that Freud accepted this ambiguity, while Ferenczi sought to overcome it through modifications of technique.