This paper explores the difference between psychotic and non-psychotic perceptions of reality. It begins by outlining the construction of a conceptual framework in infancy. The core of this enables differentiation between self and object, and internal and external space, underlying a non-psychotic perception of reality. The conceptual framework may be inadequately formed or subjected to internal dismantling, in which case a psychotic perception of reality dominates. Case material from two child psychotherapy patients is presented and linked with Bion’s theories of psychosis to illustrate a shift between non-psychotic and psychotic thinking in the analytic hour. A psychotic perception of reality dominated by unconscious processes, as identified by Freud and developed by Matte Blanco, is explored.