This article explores the impact of material reality in the form of the analyst's unrecognized and enacted countertransference on a patient's psychic reality (PR) as it presents in the transference. PR refers to a patient's experience in the transference and to an organization of unconscious fantasies, encoded as compromise formations, that actively structures the present and can be inferred from the data of psychoanalysis. Clinical material is presented in support of the author's belief that PR plays the central role in the construction of the transference and that material reality can influence both the nature and form of the transference through the activation or inhibition of different sets of fantasies in the analyst and the patient.