Tibetan Buddhism offers the oldest written theory of psychiatry, dating back to the 7th and 8th century C.E. In this article, aspects of Tibetan psychiatry and the Tibetan view of mental illness, including the notion of demonic possession, are examined and compared to Western descriptive psychiatric and psychoanalytic object relations perspectives on mental illness. The mythology of Palden Lhamo is also explored, including the way this Tibetan Buddhist “special protector,” or “dharmapala,” is associated with the cure and causation of mental illness in Tibetan Buddhist conceptions of mental illness. The myth of her life is further explored and interpreted from a social psychological perspective in terms of its similarities and differences to the life of the Buddha, and to historical figures involved in Tibet's transformation from a war-like state to a pacifist Buddhist state.