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Current psychological scholarship is based on a dichotomy between habit, associated with automatic reflex behavior, and creativity, which involves deliberation, purpose and heuristic procedures. However, this account is problematic and contradicts everyday experience where mastery, for instance, is one of the highest levels of creative performance achieved within a habitual practice. This article argues that such a separation misrepresents both habit and creativity with important theoretical and practical consequences. A first step toward reconciling the two terms is made by revisiting a series of foundational strands of theory from psychology and related disciplines. In light of these sources, habit is reformulated as a social, situated, and open system, and habitual creativity defined as the intrinsically creative nature of customary action, reflected in the way habits adjust to dynamic contexts, the way they are used, combined, and ultimately perfected. Further distinctions are then made between habit, improvisation, and innovation. Both improvisational and innovative creativity are embedded in habitual forms and this is well illustrated by craftwork: a practiced type of activity on the basis of which artisans improvise, whenever obstacles or difficulties are encountered, and even get to innovate when their intention is to generate novel artifacts or work techniques.