Difficult life experiences in adulthood constitute a challenge to the narrative construction of identity. Individual differences in how adults respond to this challenge were conceptualized in terms of two dimensions of narrative identity processing: exploratory narrative processing and coherent positive resolution. These dimensions, coded from narratives of difficult experiences reported by the women of the Mills Longitudinal Study (Helson, 1967) at age 52, were expected to be related to personality traits and to have implications for pathways of personality development and physical health. First, the exploratory narrative processing of difficult experiences mediated the relationship between the trait of coping openness in young adulthood (age 21) and the outcome of maturity in late midlife (age 61). Second, coherent positive resolution predicted increasing ego-resiliency between young adulthood and midlife (age 52), and this pattern of increasing ego-resiliency, in turn, mediated the relationship between coherent positive resolution and life satisfaction in late midlife. Finally, the integration of exploratory narrative processing and coherent positive resolution predicted positive self-transformation within narratives of difficult experiences. In turn, positive self-transformation uniquely predicted optimal development (composite of maturity and life satisfaction) and physical health.