In this paper the authors extend their examination of the child's perception of psychic reality, and the integration of the ‘psychic equivalent’ and ‘pretend’ modes into a reflective mode at around the oedipal stage. A model is presented of the elaboration of a core or psychological self through early object relationships, and they describe how the transition in modes of experiencing inner and outer reality fits in with this model. They then look at evidence from both developmental psychology and psychoanalytic thinking, and consider to what extent their thinking is compatible with these. They maintain that there is consistent empirical evidence supporting the model they have presented, and that it can be seen as complementing and extending previous psychoanalytic developmental theories.