This dissertation takes a functional view of language and applies its perspective to literary discourse, both poetry and prose. Following the performative hypothesis by Ross (1970), which argues that a declarative sentence consists of the performative part and the proposition, I assume that a literary discourse also has these two parts: the performative level which consists of the author-reader level (speech act of narration) and the textual proposition. I argue that the propositional text is made of what I term 'discourse theme', 'discourse rheme' and 'the mediating function', which transforms the first into the second one in a communicative and dynamic way. The propositional content of this variety of discourse is best viewed in terms of Halliday's extended concept of the 'text-forming' functional-semantic component based on the Functional Sentence Perspective (FSP) of the Prague School linguists - the concepts of theme, rheme, transition, and Communicative Dynamism -, or, what I term 'discourse theme', 'discourse rheme' and 't4e mediating function'. I also argue that the . coherence scope of Jakobson's (1960: 358) 'equivaleI!ce' in the micro-structural arrangement's of verbal elements in a literary text,' whether sound or sense, sentence or episode, depends upon the functional theme-rheme structures. The literary texts discussed range from short poems to longer works such as those of Kazuo Ishiguro. Occasional examples from other works of English literature are also included.