Identity, also referred to as "self-identity," has to do with what an individual believes encompasses his or her total self as an individual. This covers a very broad area, including cultural identity, gender, and sexual identity, as well as religious identity. On the other hand is self-esteem, which is how important people view themselves to be in relation to the rest of society. The way in which identity and self-esteem are interlinked can be stated in a simple example: if a man believes that he is a criminal, then it is part of his identity, his overall make-up, which determines the value or potential that he thinks that he possesses.

Everyone identifies with something, seeing himself or herself as belonging to a particular group, such as a Christian, a Buddhist monk, or a Virginian. Titles carry a lot of weight with people, whether logical or illogical. If an individual sees himself or herself as belonging to a particular category of people, he or she understands himself or herself as the type of person who does whatever that group is supposed to be doing. He or she, in fact, identifies with the members of the group, taking that on and incorporating it into his or her whole self. While identity has a direct effect on how people feel about themselves, self-esteem is often reflected in the types of things to which people choose to attach their identities.

Those with high self-esteem believe that they are worthy, like themselves regardless of noted imperfections, are confident, and know what is important to them. Low-self esteem individuals have little regard for themselves, feeling that they don't really matter and that anything that they do is ineffectual. Progressing gradually over time, identity and self-esteem are influenced by factors such as school, peers, parenting, and work at each stage of human development, especially during childhood and adolescence. Erik Erikson's Psychosocial Stages of Development theory suggests this, emphasizing that an individual can change his or her social life at any point to improve himself or herself, affecting his or her identity and self-esteem in a positive way.

Acceptance and belonging are very essential to building high self-esteem. Psychologist Abraham Maslow revealed this concept through his Hierarchy of Needs pyramid, in which there are five levels of human needs ranked from lower-level needs to the top-level needs. His theory supposes that there are specific needs that are essential to survival even before upper-level needs can be satisfied, which include self-actualization and self-esteem. People must feel that they belong, are loved, respected, and accepted by others before self-esteem needs can be adequately met, demonstrating yet another way in which identity and self-esteem are associated.