The article argues that a particular implementation of phase theory makes it possible to account for seemingly contradictory facts of Hungarian that no other framework has been able to handle. Namely, (a) Hungarian word order is fixed preverbally and free postverbally. The fixed word order of a string is liberated when it is crossed by V-movement. (b) Grammatical phenomena sensitive to c-command provide evidence of both configurationality and nonconfigurationality. The proposal is based on the following assumptions: The derivation of the Hungarian sentence involves a lexical phase (PredP) and a functional phase (a TP or a FocP), both headed by the raised V. When the functional phase is constructed, the silent lower copies of the V and their projections are deleted, which results in the flattening of the phasal domain. Grammatical phenomena indicative of a hierarchical structure are interpreted on the hierarchical domain of the lexical phase, whereas those indicative of a flat structure are interpreted on the flattened domain of the functional phase. The sister constituents of the flattened domain of the functional phase can be linearized in a free order in PF.