Diagnostic classification systems contain a core divide between neurosis and psychosis, leading to their separate study and treatment. The basis for the separation of the disorders is outlined and reassessed. It is argued that the empirical evidence does not support such a sharp distinction between neurosis and psychosis. The frequent occurrence of emotional disorder prior to and accompanying psychosis indicates that neurosis contributes to the development of the positive symptoms of psychosis. Psychological theories and experimental evidence concerning the influence of emotion on the content and form of delusions and hallucinations are therefore reviewed. It is argued that in many cases delusions are a direct representation of emotional concerns, and that emotion contributes to delusion formation and maintenance. The content of hallucinations less often directly expresses the emotional concerns of the individual, but emotion can trigger and contribute to the maintenance of hallucinatory phenomena, although how this occurs is not well understood. It is concluded that study needs to be made of the interaction between psychotic and neurotic processes in the development of delusions and hallucinations, and that neurotic and psychotic disorders may have common maintenance processes. (C) 2003 Elsevier Science Ltd. All rights reserved.