Contemporary literary fiction increasingly engages with complex psychological and philosophical questions surrounding human agency, identity and the consequences of choice. Matt Haig’s The Midnight Library (2020) presents an imaginative narrative in which the protagonist navigates multiple alternative lives, offering a compelling space for examining the interplay between regret, possibility and self-discovery. While existing research has explored decision-making within psychology and freedom within existential philosophy, comparatively little interdisciplinary literary criticism has examined how these theoretical perspectives converge in the novel’s representation of indefinite possibilities and human decision-making. Addressing this gap, the present study investigates how The Midnight Library constructs the concept of indefinite possibilities through the intersecting lens of counterfactual thinking, narrative identity and existentialism. Adopting an interpretivist research paradigm, the study employs qualitative textual analysis and close reading patterns. The analysis is informed by counterfactual thinking, narrative identity theory and existential philosophy to explore how imagined alternative lives function not merely as speculative narrative devices but as mechanisms for identity reconstruction, moral reflection and existential self-realisation. The study argues that Haig reconfigures conterfactual thinking from a process associated primarily with regret into a transformative narrative practice that fosters acceptance, agency and meaning-making. By integrating insights from literary studies, cognitive psychology and philosophy, this article contributes to interdisciplinary humanities research by demonstrating how contemporary fiction can illuminate the cognitive and existential dimensions of human decision-making. It further positions The Midnight Library as a significant text for understanding the relationship between narrative imagination, psychological resilience and the construction of selfhood in contemporary literature.