This study is an initial attempt to sort out some of the problems in an area of great complexity: the subjective allocation of inner phenomena to the outer world. We first separated processes which may have similar surface manifestations, such as displacement, transference, and processes of early differentiation from externalization. Within the category of externalization, we made a further distinction between modes of functioning, e.g., generalization and defenses. Among defensive externalizations we described the attribution of cause, externalization of aspects of the self representation, and externalization of drives, i.e., projection proper. The latter two were discussed in detail, and the differences between them were examined from the point of view of individual development and family dynamics.