This article proposes a psychoanalytic theory of small group development. Each group phase is seen as deriving its resemblance to a corresponding stage of infantile development by virtue of the unconscious instinctual wish which makes up the prevalent group transference. The appearance of the oral-dependent phase during group formation is explained by regression induced in group-related ego. Through the leader's interpretation of the transferences of each phase, identifications are required which produce a differentiation of the members' group-related ego and superego structures. Each structural advance produces a corresponding advance in the instinctual transference, which is modulated through these structures. An explanation is thus provided for recapitulation of the psychosexual stages of infantile development in the developmental phases of small groups.