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This paper discusses the use of humor and jokes in psychoanalysis from both theoretical and clinical perspectives. I review and extend Freud's concept of “joke-work” as a parallel to “dream-work” and suggest that his interest in jokes brought him to the limits of the one-person energy theory and to the threshold of two-person relational theory. The paper expands concepts derived from Klein, Lacan, and Matte-Blanco in the development of both an intrapsychic and an intersubjective understanding of jokes and humor. This contemporary perspective on jokes and humor allows us to enter into a view of the unconscious as a transformational system that addresses issues of powerlessness, meaninglessness, and the limits imposed by biological and social reality and differentiates aspects of unconscious and conscious processes. Clinically jokes and humor present a means of interpreting, organizing, perceiving, and generating unconscious meanings and developing profound intersubjective experiences of affective connection and understanding. I provide several illustrations of the use of humor and jokes in psychoanalysis and psychotherapy and present theoretical observations and suggestions on the importance of these processes in the development of intimate relationships.