Positive illusions are unrealistically favorable attitudes that people have towards themselves or to people that are close to them. Positive illusions are a form of self-deception or self-enhancement that feel good, maintain self-esteem, or avoid discomfort, at least in the short term. There are three general forms: inflated assessment of one's own abilities, unrealistic optimism about the future, and an illusion of control. The term "positive illusions" originates in a 1988 paper by Shelley E. Taylor and Jonathon D. Brown. Taylor and Brown's model of mental health maintains that certain positive illusions are highly prevalent in normal thought and predictive of criteria traditionally associated with mental health.

There are controversies about the extent to which people reliably demonstrate positive illusions, as well as whether these illusions are beneficial to the people who have them.

In the above-average effect, people regard themselves more positively than they regard others and less negatively than others regard them. Positive attributes are judged to be more descriptive of themselves than of an average person, whereas negative ones are judged to be less descriptive of themselves than of an average person. Despite the fact that it is statistically impossible for most people to be superior to their peers, rather than being equally aware of ones strengths and weaknesses, people are more aware of their strengths and not very aware of their weaknesses. This effect has been widely recognized across traits and abilities including the different abilities of driving, parenting, leadership, teaching, ethics, and general health. This effect is also evident in memory; most people also tend to perceive their ability to remember as better than it actually is.

The illusion of control is an exaggerated assessment of the individual's personal control over environmental circumstances such as the roll of dice or flip of coin.

Optimism bias is a tendency for people to overestimate their likelihood of experiencing a wide variety of pleasant events, such as enjoying their first job or having a gifted child, and somewhat underestimate their risk of succumbing to negative events, such as getting divorced or falling victim to a chronic disease. This illusory nature of optimism is also evident in peoples' under-estimation of the time taken for a variety of tasks.

Like many forms of human perception, self-perception is prone to illusion. Positive illusions have been commonly understood as one of the apparent effects of self-enhancement, a desire to maximize the positivity of one's self-views and a function of boosting self-esteem. It might be due to the desire to see oneself more favorably relative to one's peers. These kinds of self-serving attributions seemed to be displayed by positive self-viewers only. In fact, the negative-viewers were found to display the opposite pattern. Research suggests that there may be some genetic contributions to the ability of developing positive illusions.^[vague] Early environment also plays an important role, in which people are more able to develop these positive beliefs in nurturing environments than in harsh ones.

Alternative explanations involve dimensions like the easiness and commonness of the tasks. In addition, tasks that shifted attention from the self to the comparative target would stop people overly optimising.

The cultural prevalence also has a significant role in positive illusions. Although it is easy to document positive illusions in individualistic Western cultures, people in collectivist East Asian cultures are much less likely to self-enhance and, indeed, are often self-effacing instead.