This paper examines the concept of “idealism” in the famed Daoist text known as the Zhuangzi (莊子). In particular, this study notes a foundational source of Western thought, Platonic idealism, and then investigates whether such concepts as “ideals” or transcendent values appear in Eastern sources, notably Daoist literature. This study argues that even while the concept of a fixed, external ideal does not exist in Daoist sources, the Zhuangzi nonetheless presents a clear conceptualization of an ideal state. In this Daoist framework, idealism is conceived as a complete resolution of the dualism between the individual and the universe or tian (天), the latter of which is erroneously understood by human beings, the Zhuangzi argues, as external and separate. This paper goes on to argue that the “idealist projects” of Western and Eastern idealism are quite different. For Western idealism, most characteristically as found in Plato, the ideal is an external goal to be reached: a capturing of an eternal, paradigmatic truth. The Eastern idealist model proposed here, by contrast, is against even the conception of anything “external”—in the Daoist framework, any belief in an external, objective reality is rejected as illusory. Thus, while Plato’s philosophy is characterized by his idealist “Forms,” Daoist thinking as it appears in works such as the Zhuangzi has a sense of the “ideal” in the concept of a “holistic idealism.” This is a dissolution between the subject and the object, between the observer and the observed, into one holistic entity.