Through six interrelated studies the author examines the common conception that daydreams and fantasy are important factors in the onset and maintenance of severe psychopathology, particularly hallucinatory psychosis. Results of the studies failed to support the idea that psychotic patients have particularly frequent or vivid daydream activity, and indicate instead that psychotic patients tend to inhibit aspects of normal fantasy. Hallucinatory schizophrenics, in particular, were blocked in their emotional-interpersonal imagery. In a study of depressed patients, a negative fantasy style was found to be associated with clinical depression. Sleep disorder was similarly associated with a negative fantasy style.