In Marxist theory, false consciousness is a term describing the ways in which material, ideological, and institutional processes are said to mislead members of the proletariat and other class actors within capitalist societies, concealing the exploitation and inequality intrinsic to the social relations between classes. As such, it legitimizes and normalizes the existence of different social classes. The term was never used by Karl Marx. It was used once by his associate Friedrich Engels to describe an incomplete insight into ideology, and then theorised by later Marxists in the 1920s.

According to orthodox Marxists, false consciousness is consciousness which is misaligned from reality. Thus, it is a serious impediment to human progress and correcting it is a major focus of dialectical materialism.

Although Marx never used the term "false consciousness" in his writings, he made references to workers having misguided or harmful ideas, and he suggested how those ideas get reinforced by powerful elites. For example, in an 1870 letter to Sigfrid Meyer and August Vogt, Marx discussed the antagonism between English proletarians and Irish proletarians that was rampant in his day:

The ordinary English worker hates the Irish worker as a competitor who lowers his standard of life. In relation to the Irish worker he regards himself as a member of the ruling nation and consequently he becomes a tool of the English aristocrats and capitalists against Ireland, thus strengthening their domination over himself. He cherishes religious, social, and national prejudices against the Irish worker... This antagonism is artificially kept alive and intensified by the press, the pulpit, the comic papers, in short, by all the means at the disposal of the ruling classes."

Marx considered this type of manipulated animosity among workers to be, in Ashley Crossman's words, "the opposite of class consciousness. Individualistic rather than collective in nature, it produces a view of oneself as a single entity engaged in competition with others of one's social and economic standing, rather than as part of a group with unified experiences, struggles, and interests."

The coinage of "false consciousness" is commonly traced to an 1893 letter from Friedrich Engels to Franz Mehring. It was ten years after Marx's death. Engels was seeking to explain how ideological notions come about, as he and Marx had understood it:

Ideology is a process accomplished by the so-called thinker consciously, it is true, but with a false consciousness. The real motive forces impelling him remain unknown to him; otherwise it simply would not be an ideological process.

Marxist philosopher Joseph McCarney notes in "Ideology and False Consciousness" that Engels was referring to "a quite specific kind of cognitive failure on the part of an individual, a failure of self-awareness, a lack of insight into the 'motive forces' of their own thinking." Engels was not using the term in the full sense it later acquired, i.e., as the mindset of a subordinate class which wittingly or unwittingly adopts the ideology of the ruling class. Engels only made this one reference to false consciousness. He died two years later and never had an opportunity to expound on its meaning and significance.

It was not until the 1923 book History and Class Consciousness by Hungarian philosopher György Lukács that the concept of false consciousness was explored in depth. Ron Eyerman writes that Lukács defined false consciousness as "the distorted perception and beliefs an individual or a social class acquires through their life activities in capitalist society." Lukács did not regard false consciousness as a static condition but rather as a dialectical stage in the movement toward a true class consciousness.