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Biologically-oriented clinicians generally consider patients given a diagnosis of schizophrenia (psychosis) to be suffering from a genetically-determined brain disease best treated with medication. However, research in the last 2 decades indicates that a history of childhood trauma significantly increases the risk of psychosis, a finding that has revitalized interest in psychotherapeutic approaches to psychosis. Cognitive-behavioral therapy can be helpful, but when delivered as is typical in 16–25 sessions, fails to adequately address childhood trauma. This paper describes how abused children develop early relational models based on their interactions with abusers that coalesce as persecutory and grandiose internal psychological objects, which when projected into mental representations of other people and the outside world result in hallucinations and delusions. This process is illustrated with an extended case example of a woman who was abused as a child who split her internal object world into three psychological objects: her husband James (a real person); Benny, a hallucinated voice who stalks her, threatening to rape her; and, Niko, also a hallucinated voice, an idealized lover whom she plans to marry.