The differentiation between an identity crisis, a transient phenomenon that usually results (after resolution) in a well-integrated identity with flexible and adaptive functioning, and an identity diffusion that is viewed as a basis for subsequent personality pathology, has a major impact on the selection of a treatment method. A new treatment method (Adolescent Identity Treatment, AIT), a modification of Transference Focused Psychotherapy, was developed to treat adolescents with identity diffusion in order to improve their relationships with friends, parents, and teachers and to help them acquire positive self-esteem, clarify life goals and establish a stable identity. In a case study we describe the basic approaches of AIT in assessment and treatment.