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The author explores the nature and development of psychic reality and draws the following conclusions: (1) psychic reality is equivalent to subjective (conscious) awareness. (2) Psychic reality is open to unconscious influences, both as to content and motivation. Psychic reality thus is not equivalent to unconscious fantasy or transference, but can include effects of both. (3) Psychic reality can also include objective experience. (4) The capacities for internal psychic experience and knowledge of objective reality externally are modes of experiencing that develop early and achieve gradual integration through integrative play. (5) Psychic experience, and therefore psychic reality, cannot be regarded as exclusively subjective or objective, but as inherently both. The ways in which subjectivity does not preclude or exclude objectivity are discussed and related to transitional experience. (6) The inherent subjectivity of psychic experience precludes any form of direct intersubjective communication, that is, unmediated communication from subject to subject. The tensions of subjectivity and objectivity are discussed in relation to the analytic situation, in which perspectives of patient and analyst differ and reflect their respective psychic realities, each with its own validity and uncertainty and openness to unconscious needs, fantasies and motives.