In this paper we present three studies that address the difference between physical and psychological groups, the conditions that create a transformation from the one into the other, and the psychological processes underlying this transformation. In Study 1 we demonstrate correlations between shared social identity, desired physical proximity to others, and positive emotions in the company of others. Study 2, employing a between-subjects design, finds that an event that creates shared fate, such as the breakdown of a train, leads to greater comfort in social interactions (e.g., ease of conversation) and comfort in sensual interactions (e.g., tolerance of physical touch) with other passengers, and that this occurs through an increase in shared social identity but not through social identification. Study 3 obtains similar findings using a within-subjects design. In combination, these studies provide consistent evidence for the role of shared social identity in the emergence of psychological groups from physical groups.