Just as behavioral habits define our behavioral lives, mental habits define our psychological lives. Mental habits can be thought of as the perceptual, emotional, and cognitive processes that shape and bias how we perceive self, others, and the world. This talk will describe a view of mental habits from the perspective of cognitive neuroscience, focusing on the idea that the brain is a “prediction machine” designed by evolution to help the body stay alive. In this view, our perceptions of the world around us, and of ourselves within it, emerge as kinds of “controlled hallucination” in which the brain’s best guesses—perceptual inferences—are constrained by sensory signals coming from the world and the body. We don’t passively perceive things, we actively construct our perceptions of self and world, and the way in which we do this constitutes and reflects our mental habits. Such habits, while necessary for perception and cognition, can also be maladaptive in many ways. However, habits can change, and a precondition for such change is recognizing mental habits for what they are—active processes of perceptual construction. Revealing the mechanisms of habit formation can lay new foundations for repairing our interactions with each other and with the world around us.