Although being a core concept in Freud's theory he never defined the concept of psychical reality concisely and systematically. On the one hand psychical reality encompasses the whole field of subjective experiences. On the other, it is understood more narrowly as the transformation of experiences in the unconscious. Substituting the idea of different meanings ascribed to Freud's concept this article propose to differentiate between levels in the psyche with the main focus on the unconscious level of the dream and phantasy and the real unconscious respectively. Starting from the most superficial level of subjective reality the text moves towards that of phantasy formation illustrated primarily by Freud's text on 'A child is being beaten' elaborated further by Laplanche's translational model the article ends up at the deepest level represented by the late Lacan and his concept of the Real Unconscious. With this concept Lacan points to a reality in the unconscious which designates the impossible, a point of resistance in theory as well as in the clinic. Lacan has merited attention in this paper that has aimed towards a theory of the non-symbolic level of psychical reality encompassing the unconscious level of the dream and phantasy as well as the level of the Real Unconscious.