There are many different ways to approach analyzing a work of literature. Conventionally, we look at plot, theme, character, setting, and tone. Other forms of criticism focus on reading through a biographical lens or on social forces impacting a text. However, starting in the twentieth century, critics began to do psychoanalytic readings of texts.

In this method, which began by applying Freudian theory to literary texts, literary critics examined the unconscious motivations driving characters in literature. One of the most famous examples of this is the psychoanalysis of Hamlet to show that Claudius enacted Hamlet's Oedipal impulses. Claudius fulfilled Hamlet's repressed, unconscious desire to kill his father and marry his mother. Hamlet, according to this theory, hates and wants to destroy Claudius because he is unconsciously envious that Claudius did what Hamlet wanted to do. In this reading, the ghost is secondary: Hamlet is simply trapped between desire and guilt.

In the late twentieth century, literary critics began to apply the work of Jaques Lacan to literary criticism. Lacan saw much of the desire that Freud depicted as literal as, instead, symbolic desire: for example, he argued that rather than literally fearing castration, the young boy fears the "lack" that castration symbolizes. Many Lacanian critics understand literature itself as way to fill in "lacks" or "gaps" to fulfill unconscious desires.

The key point is that psychoanalytic criticism looks at the unconscious desires and motivations of individual characters to try to understand what drives them.

The psychoanalytic literary criticism is influenced by psychoanalysis and the tradition begun by Sigmund Freud. This approach to literary criticism not only rests on the theories of Freud; it may even be said to have begun with Freud, who wrote literary criticism as well as psychoanalytic theory.

The first aspect of the psychoanalytic criticism begins with the analysis of a particularly interesting character in a work.  The fictional characters should be evaluated based on the interpretive process of Freudian concepts: Oedipus complex, Freudian slips, Id, ego, and superego and dreams if given in the material.

This type of criticism helps in understanding difficult symbols, actions, metaphors, and settings in a literary work.  However, as in all forms of criticism, there are limitations.  Many psychoanalysts believe that this approach applies to any literary work.  Yet, most critics argue that no one approach can adequately explain everything about a complex work.

Freud’s theory cannot be the only approach used in literary criticism.  A great work cannot be placed in one slot because it may have a more than one approach needed to fully understand the work.

Literary criticism tends to concentrate on secondary aspects of the arts and thereby ignores the all-important subject of value. And at other times, the very language of criticism causes misunderstandings because of its vague, often deceiving vocabulary. For example, critics often speak of literature as if the material itself possesses qualities, whereas what the analysis should say is that the material evoked effects in us.  

Additionally, this type of criticism should not be stretched to fit every literary work. 

The danger is that the serious student critic may place too much importance on the psychoanalysis, forgetting that Freud's is not the only approach to literary criticism. To see a great work of fiction or a great poem primarily as a psychological case study is often to miss its wider significance and perhaps even the essential artistic experience it should provide.

Many of the works appropriate for this type of analysis might be mystery or detective stories or archaeological narratives.

This type of criticism begins by asking what did the author intend in his work. Despite the importance of the author here, psychoanalytic criticism does not concern itself with "what the author intended."   Some of the questions that should be asked are “what is the main character’s problem or why does the author not include any positive father figures in the story?”