Beyond this argument, however, Freud departs significantly from his contemporaries and immediate predecessors in the study of religion, lending his own unique psychoanalytic insights to create a theory of just how the Exodus story as we have received it came to be composed. The problem Freud needs to solve is that the character of Moses as portrayed in the book of Exodus doesn't act much like someone who is moving away from naturalistic and magical religion towards a rational and moralistic religion. It is true that Moses is associated with a sophisticated moral law. However, the text of the Mosaic law as preserved in the Pentateuch (the first five books of the bible which are held to be canonical by both Jews and Christians) freely mix moral and ceremonial precepts. Moses is, at one moment, telling people how to treat their slaves and contract marriages and, in the very next, giving instructions for how to make animal sacrifices and purify their houses of mildew. Far more dramatically, many of the deeds ascribed to Moses are magical and naturalistic in character. He parts the sea. He strikes the Nile with his staff and turns it to blood. The "plagues" that assault the Egyptians are precisely the sort of natural catastrophes that "primitive" religions are supposed to be concerned with, and which supposedly more sophisticated moral and rational religion is supposed to have gotten past. Freud needs to explain why, in Exodus, Moses appears to be a rational moralist at one moment and a magician the next.

Freud's solution (which is not too far away from the sorts of things proposed by those among his contemporaries who advocated a source-critical approach to interpreting scripture, such as Julius Wellhausen) was to propose that the character of Moses represented in the book of Exodus originated as two distinct historical figures. One was Moses the Egyptian, the inventor of monotheism. The other was a Midianite priest, whom Freud speculates may also have been named Moses, and who, with other Midianites who joined themselves to the Hebrews to form the people of Israel, worshipped a volcano god (hence the Exodus narrative's emphasis on Sinai as the site for God's appearances to the people). Freud further speculates that the people themselves may have killed Moses the Egyptian and then, in order to collectively repress the memory and the guilt of this brutal act, fused him with the Midianite "Moses."

It is important to note the ways that Freud's proposals in Moses and Monotheism are of a piece with some of his other important works. In Civilization and its Discontents (1930), Freud proposed that what appear to be "universal" moralities that people feel in their conscience are actually the internalizations of the rules necessary to govern sophisticated societies. The superego, the "conscience" that keeps the ego or self in check and prevents it from following the baser drives towards sex and death associated with the id, actually develops as societies teach their members to think of rules in this way. These insights lend a specifically psychoanalytic slant to the standard narrative of early twentieth century religious studies: that religions become more "rational," more moralistic, and more likely to be monotheistic as societies become more sophisticated. The reason that monotheism is linked to a higher degree of civilization is, for Freud, that more sophisticated societies need a notion of "universal" moral norms. In Future of an Illusion (1927), Freud makes many of these points explicitly and says, furthermore, that religion is distinctly related to the "Oedipus complex," the desire of men to kill their fathers. In Moses and Monotheism, the murder of Moses the Egyptian and the collective repression of that memory is a primordial patricide of exactly this sort.

Perhaps the most enduring element of Moses and Monotheism, however, is the idea that Moses was an Egyptian. In Freud and the Non-European (2001), for example, Palestinian philosopher and critical theorist Edward Said suggests that Freud's idea of an Egyptian Moses suggests the possibility of a Jewish ethic built upon making room for the other, an ethic drawn from the fact that Judaism needs a non-Jew (Moses the Egyptian) as a founding figure. Judith Butler, in her 2013 volume Parting Ways: Jewishness and the Critique of Zionism, takes up Said's reading of Freud and places it in dialogue with a number of other twentieth-century Jewish thinkers besides Freud in order to develop a Jewish ethic that can contest the colonial logic of the State of Israel. Thus, while unorthodox, Freud's construction of the character of Moses has had a long-lasting impact not only upon psychology, but upon philosophy, ethics, and critical theory as well.