Jacob's nighttime wrestling match at the Jabbok River represents far more than a physical struggle - it marks a profound psychological and spiritual transformation that shaped Jewish identity and interfaith relations for millennia. Through close textual analysis of the Hebrew Bible, combined with Jungian psychological frameworks and comparative rabbinic interpretations, a new understanding emerges of how Jacob's encounter with his "shadow self" enabled his evolution into Israel. While traditional rabbinic readings, developed in response to Christian Rome's competing claims to the Abrahamic covenant, portrayed Esau as intrinsically evil, this analysis reveals Jacob's wrestling as an integration of rejected aspects of himself that he had projected onto his brother. This integration allowed Jacob to recognize the divine image in both himself and others, enabling reconciliation without assimilation. The subsequent Dinah narrative at Shechem illustrates the persistent tension between maintaining Jewish distinctiveness and engaging with other peoples - what emerges is a "dual confrontation" requiring both differentiation from and identification with others. Jacob's transformation thus provides a paradigm for modern Jewish identity, offering insights for maintaining religious uniqueness while constructively engaging secular society. This reinterpretation demonstrates how these ancient narratives continue to illuminate contemporary Jewish identity challenges and the complex balance between particular covenant and universal human responsibility.