Psychological fiction (also psychological realism) is a literary genre that emphasizes interior characterization, as well as the motives, circumstances, and internal action which is derivative from and creates external action; not content to state what happens, it rather reveals and studies the motivation behind the action. Character and characterization are prominent, often delving deeper into characters' mentalities than other genres. Psychological novels are known as stories of the "inner person." Some stories employ stream of consciousness, interior monologues, and flashbacks to illustrate characters' mentalities. While these textual techniques are prevalent in literary modernism, there is no deliberate effort to fragment the prose or compel the reader to interpret the text.
The Tale of Genji, written in 11th-century Japan, was considered a psychological novel by Jorge Luis Borges. In the west, the origins of the psychological novel can be traced as far back as Giovanni Boccaccio's 1344 Elegia di Madonna Fiammetta; that is before the term psychology was coined.
In French literature, Stendhal's The Red and the Black and Madame de La Fayette's The Princess of Cleves are considered early precursors of the psychological novel. The modern psychological novel originated, according to The Encyclopedia of the Novel, primarily in the works of Nobel laureate Knut Hamsun - in particular, Hunger (1890), Mysteries (1892), Pan (1894) and Victoria (1898).
One of the greatest writers of the genre was Fyodor Dostoyevsky. His novels deal strongly with ideas, and characters who embody these ideas, how they play out in real world circumstances, and the value of them, most notably The Brothers Karamazov and Crime and Punishment.
[The Tale of Genji, as translated by Arthur Waley,] is written with an almost miraculous naturalness, and what interests us is not the exoticism — the horrible word — but rather the human passions of the novel. Such interest is just: Murasaki's work is what one would quite precisely call a psychological novel. ... I dare to recommend this book to those who read me. The English translation that has inspired this brief insufficient note is called The Tale of Genji.
The most significant novelist of the Scandinavian countries is Knut Hamsun, who almost singlehandedly created the modern psychological novel through the publication of four works that probe the human subconscious, Sult (1890, Hunger), Mysterier (1892, Mysteries), Pan (1894), and Victoria (1898).