This paper aims to address how the institution functions for the psychotic. People with a psychotic structure often have difficulties integrating into a community and functioning within a social bond. This means that on the level of treatment it is not immediately apparent how to build a lasting therapeutic relationship (and environment). Jean Oury’s institutional psychotherapy starts from this point, inspired by Marx’s analysis of social alienation. This paper focuses on the way in which an institution can be organised according to the principles of Oury’s institutional psychotherapy, taking into account the phenomenon of social alienation. First the theory of the social alienation is described, then the praxis of Oury’s institutional psychotherapy is outlined.