This study examines how changes in clients’ and their therapists’ perceptions of the therapeutic distance relate to changes in their reported alliance. Alliance is commonly measured using self-report questionnaires that provide information regarding the partners’ bond and collaboration, but do not reflect the interactions or events underlining them. We developed the Observer Version of the Therapeutic Distance Scale (TDS-O; Egozi et al., 2020) to assess components of the therapeutic relationship, including closeness–distance dynamics, autonomy and engagement. Sixty-seven clients and their 27 therapists completed the Working Alliance Inventory (WAI) and underwent Relationship Anecdote Paradigm (RAP) interviews in which they related narratives about their experiences with each other three times during psychodynamic therapy (after sessions 5, 15 and 28). The clients’ and their therapists’ narratives were rated on the TDS-O. Clients’ and therapists’ decrease in their sense that the partner was too distant correlated with WAI increase, as did therapists’ decrease in their opinion that the client was too close. Increases in both partners’ engagement was also related to WAI increase. A clinical example of a successful case demonstrates these changes and highlights significant moments that might contribute to positive change. The study establishes the relationship between the alliance and therapeutic distance, and reveals discrepancies in the experiences of clients and therapists. Tracking therapeutic distance has the potential to refine therapists’ attunement to their clients’ emotional needs.