Alongside the global indigenization movement starting around the 1980s and the ongoing deteriorating mental health situation in China, both publications on the psychological value of Confucianism, Daoism and Buddhism and their use in therapeutic practices are mushrooming. Both scholars and practitioners not only base themselves on the rich traditional reflexive discourses on the psyche and on how to be(come) human, but also seek parallels between these traditions and Western psychology and healing practices. This presentation investigates a form of psychotherapy that is rooted in the ‘fasting of the heart-mind’ (xinzhai 心齋), in the Zhuangzi described as a meditative practice that “empties” the heart so that it becomes open and responsive to the world but is not affected by it. This state of the heart is also known as the “mirror-heart”, and is characteristic of the Daoist sage. This therapy is sometimes also practiced as a combined xinzhai (Zhuangzi)-Active Imagination (Jung)-Embodied Imagination (Bosnak) therapy. In the therapeutic process, through facilitating free flow of vital energy (qi 气), experiences of the dissolution of object-subject boundaries supposedly lead to inner transformation (wuhua 物化). Based on philosophical-psychological inquiry into the practice of xinzhai, and on analysis of case-studies by its practitioners, this article discusses how such therapy is presented not only as a powerful transformative individual healing path, but also as informative for the therapeutic relationship. However, exactly because of the potential value of Daoism in psychological treatment, therapies based on inner practices that traditionally emphasize long processes of spiritual cultivation should be critically assessed. This article thus also reflects on the psychologization of Daoism against the background of a far-reaching pragmatic governmental approach to ancient wisdom.