This paper discusses Freud's classic contribution “Formulations on the Two Principles of Mental Functioning” in the historical context of the Freud-Jung relationship, covertly represented by an obscure dream with Freud's interpretation. Freud added the dream and its interpretation to a previous unpublished version of the paper. Freud's analysis of his conflicts with Jung (and earlier with Fliess) particularly regarding parricide and plagiarism, contributed to the incipient psychoanalytic theory of aggression. The paper further explores psycho-biographical issues in the life and work of Freud, exemplified in the latent content of this classic paper. The pleasure and reality principles are re-examined within contemporary psychoanalytic theory.