Sarah Waters’s The Little Stranger (2009) is an intriguing piece of writing that unsettles readers through its atmospheric tension and obscurity. The novel is set in a post war Warwickshire, focusing on the decaying Hundreds Hall mansion and its inhabitants, the Ayres. The emotional and physical deterioration of the family is analogous to the crumbling mansion. The novel is told through the lens of Dr. Faraday which compels the readers to question the reliability of the haunting. Waters leaves the ending open and thus this paper is an attempt to examine the supernatural and psychological interpretation of the novel. The supernatural dimension is echoed through gothic elements like spontaneous fires, spectral presences, strange noises and the haunting figure of the “little stranger”. Waters meticulously renders the atmosphere, the architecture and the use of classic haunted house motifs which reinforces the sense of a genuine malevolent force and paranormal activity. The psychological interpretation focuses on the fragile mental state of the family and their anxieties rooted in class decline and grief which can point to hysteria and psychosomatic symptoms. Dr. Faraday’s obsessive attachment to the mansion introduces a psychoanalytic layer that links the haunting to repressed desires and latent hostility. His authority as a doctor becomes a mask that conceals bias and possible complicity. This paper will seek to examine both supernatural and psychological constructs using gothic and psychological conventions to probe deeper questions about class, desire, money and the unstable boundary between reality and imagination.