Winnicott’s ideas of transitional experience and illusion provide a means for psychoanalytic understanding of religious ideation and experience. Religion is a primary form of transitional phenomena in which symbolic function plays an important role. The use of symbols takes place in the intermediate area of experience designated by Winnicott as illusion. The author compares Winnicott’s and Freud’s concepts of illusion. Freud oversteps the bounds of logic by considering religion as an illusion equivalent to deception rather than illusion in the sense conceived by Winnicott. Unlike Freud’s view of religion as vain wish-fulfillment, religious beliefs are “essential illusions answering to fundamental and ineradicable human needs.” However, transitional religious phenomena can be distorted into fetishistic directions and take a perverse magical quality. Psychoanalysis and religion represent separate disciplines and have separate discourse. Psychoanalysis is concerned with psychic meaning of belief, not with the truth or falsity of belief.