Beginning with Freud's concept of psychic reality as the product of external events and the patient's unconscious fantasies, the author suggests that projective identification, as described by Klein, gives an account of how these two elements combine to produce one's psychic reality. The transference is an aspect of psychic reality that represents a confusion between the patient and one of his or her objects—the analyst—brought about by projective identification. A clinical example illustrates how the patient's transformation of the analyst's interpretations through projective identification contributes to the transference. Analysis of the transference in the analytic relationship allows patients to experience their role in the formation of their experience of the world, “live” and as it happens. This promotes the integration of the patient's personality. The author compares this approach with other approaches to the transference.