In the immediate aftermath of the First World War, which ended in November of 1919, Freud and his family suffered, as did most Viennese, from the total collapse of the Austrian economy. Inflation not only meant that buckets of Austrian currency were needed to buy daily goods, but that Freud's savings and life insurance plan, the only supports for his wife and aging sisters should something happen to Freud himself, were rendered worthless almost overnight. Freud was thus forced to dedicate as much of his time as possible to treating patients, preferably non-Austrian patients who could pay in foreign currencies. Freud treated a number of Eastern European patients during this time, as well as American would-be psychoanalysts who happily paid to be analyzed by the father of psychoanalysis himself. Freud made enough money to keep himself and his family comfortable, but it meant maintaining a brutal schedule of therapy sessions, sometimes up to ten or twelve fifty-five minute sessions a day.

In October of 1919, almost a year after the end of the war, Freud was finally promoted from assistant to full professor at the University of Vienna. The promotion meant almost nothing, practically speaking. It came with no obligations, no additional income, and just a few new privileges. Still, the position was prestigious. In his letters from the time, Freud happily mentions that after the promotion, people who had previously ignored or scorned him finally began to talk to him with a certain amount of respect. In July of 1919, Freud went on his first real vacation in five years. During the war, he had been unable to travel to his usual vacation spots in the mountains. Now, while Martha recovered from an attack of pneumonia in a sanatorium in Salzburg, Freud and Martha's sister Minna traveled to the Austrian spa town of Bad Gastein to escape the summer heat.

Despite Freud's new position as a well-respected, if not world famous, psychologist, the middle years of the 1920s were not pleasant ones. Freud's daughter Sophie had died of influenza in 1920. Her son, Heinz, who had been Freud's favorite grandchild, died of tuberculosis in June of 1923. Freud took the death of Heinz particularly hard. He seems to have invested much of his hope for the future in his grandson, and Heinz's death was a crushing blow. Josef Breuer, a man from whom Freud had been estranged for many years but whom he still respected, died in June of 1925.

During these years, the Committee, Freud's secret band of supporters, was also dying, both literally and figuratively. In 1925, Karl Abraham died from a mysterious illness that had left him coughing and weak for the last year of his life. Ernest Jones, in his biography of Freud, guesses that Abraham died of undiagnosed lung cancer. Two years earlier, in 1923, the Committee had been weakened by a bitter dispute between two of its members, Jones and Otto Rank, over the running of the Internationaler Psychoanalytischer Verlag. Furthermore, in 1923, Rank had published a book, called The Trauma of Birth, in which he argued that the birth trauma (the pain of emerging from the womb) was the root cause of all neuroses. Claiming that the birth trauma contributed to neuroses was not radical, but Rank went further, claiming that the Oedipal crisis, which Freud said caused all neuroses, was essentially irrelevant.

Rank also began to claim that acting out in the psychotherapeutic session was as or more important as talking through, the traditional method of psychoanalytic treatment. This meant that Rank's patients not only talked about, but actually acted out, their infantile traumas. Combined with Rank's emphasis on the birth trauma, this often meant that they pretended to emerge from the womb while Rank played the role of mother or father. This was a practice that Freud, regardless of his friendly feelings toward Rank, could not accept. The conflict was made even worse when, in 1924, Rank traveled to the United States to give a series of lectures on psychoanalysis. There, he claimed that his particular brand of psychoanalysis, with its focus on the birth trauma and acting out, was now widely accept in Europe, even by Freud. Rank's claims were false, since Freud had rejected Rank's methods in their entirety. After several back-and-forths, with Rank alternately apologizing to Freud and restating his heretical claims, Rank broke with Freud definitively in 1925, the year of Abraham's death. The loss of Rank and Abraham, combined with dissension among the Committee's other members, led to its dismantling in May of 1926.

Other problems arose from the explosive popularity of psychoanalysis in the United States. The International Congresses of 1925 and 1926 were both controversial. The former Congress was especially controversial. It took place in Hamburg, Germany, and was the first Congress attended by a large number of American analysts. There were many differences between the American and European psychoanalysts, but the biggest conflict was over lay analysis, i.e. psychoanalysis performed by analysts who had no medical training. Although Freud himself was a physician, many European psychoanalysts were not, including Rank and Hanns Sachs, both members of Freud's inner circle. In the United States, in contrast, analysts were vehemently opposed to allowing non-physicians to practice psychoanalysis. Their opposition was probably motivated in part by the uphill battle for respectability they were fighting. American analysts worried that unregulated, non-medical analysts might actually be guilty of all the sins (perversion, mysticism, etc.) for which psychoanalysis itself had been falsely criticized. Such analysts would make the battle for respectability much harder to win. There was no resolution of this difference at the Congress, and it continued to complicate relations between European and American analysts for many years to come.

During this time, Freud suffered from a personal illness that made all of the political and psychoanalytic problems even more trying. Freud had, for his entire adult life, been a vigorous and unrepentant cigar smoker. In 1923, undoubtedly as a result of this habit, a cancerous growth appeared in his mouth on the inside of his right cheek. Drastic surgery was necessary to prevent the spread of the cancer. Surgery was performed in two separate sessions in the beginning of October. Most of Freud's upper right jaw and hard palate were removed. For the next sixteen years, until his death in 1938, Freud wore an uncomfortable prosthesis that resembled a large set of dentures. Talking and eating were both difficult. Over the course of these sixteen years, thirty-three different operations were performed to remove cancerous or pre-cancerous growths in Freud's mouth. He never stopped smoking.