BackgroundPsychiatry has faced significant criticism for overreliance on the Diagnostic and Statistical Manual of Mental Disorders (DSM) and medications with purported disregard for empathetic, humanistic interventions.AimsTo develop an empirically based qualitative theory explaining how psychiatrists use empathy in day-to-day practice, to inform practice and teaching approaches.MethodThis study used constructivist grounded theory methodology to ask (a) ‘How do psychiatrists understand and use empathetic engagement in the day-to-day practice of psychiatry?’ and (b) ‘How do psychiatrists learn and teach the skills of empathetic engagement?’ The authors interviewed 17 academic psychiatrists and 4 residents and developed a theory by iterative coding of the collected data.ResultsThis constructivist grounded theory of empathetic engagement in psychiatric practice considered three major elements: relational empathy, transactional empathy and instrumental empathy. As one moves from relational empathy through transactional empathy to instrumental empathy, the actions of the psychiatrist become more deliberate and interventional.ConclusionsParticipants were described by empathy-based interventions which are presented in a theory of ’empathetic engagement’. This is in contrast to a paradigm that sees psychiatry as purely based on neurobiological interventions, with psychotherapy and interpersonal interventions as completely separate activities from day-to-day psychiatric practice.Declaration of interestNone.Copyright and usage© The Royal College of Psychiatrists 2017. This is an open access article distributed under the terms of the Creative Commons Non-Commercial, No Derivatives (CC BY-NC-ND) license.