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Drawing from existing research and concepts in social psychology, we identify “positive illusions” as an important construct for understanding long-term, stable, and satisfying employment relationships. We argue that the cognitive processes that modify the way in which individuals view their world can aid in promoting and enhancing the quality of employment relationships. These largely non-conscious processes often aid in the construction of positively distorted beliefs, referred to as positive illusions, which act to diffuse feelings of uncertainty, and drive satisfaction and commitment in close relationships. Our theoretical analysis suggests the relevance of positive illusions in the context of employment relationships, and highlights its role specifically during negative organizational shocks. We explore theoretical connections and offer testable propositions on the role of positive illusions in understanding employment relationships. These propositions have important theoretical and practical implications for the (a) applicant stage of employment, (b) organizational entry and socialization, and (c) adapting to organizational change.