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This paper examines the relationship between phonology and phonetics. After reviewing a version of Lexical Phonology and Ladefoged's phonetic view of phonology, I argue that phonology and phonetics are in a derivational relationship and propose a generative phonetic model which is intended to integrate the idea of Lexical Phonology and Ladefoged's view. In the model proposed here, the phonology-phonetics interface is located at the level of allophonic transcription, which is referred to as systematic phonetic transcription (Ladefoged 1993) or categorical phonetic representation (Keating 1990). It is also argued that the psychological reality of this categorical level is supported by a listener's categorical perception.