Narcissists are people who are simply intrigued by themselves. They talk about themselves, demand admiration and recognition and believe everyone else should be jealous of them. They might even lie or exaggerate the truth as a way to elevate themselves above the "flock." When you come across a narcissistic person, your initial reaction might be shock, but in some cases the best reaction might be none at all.
Understand that narcissism is a personality disorder—often it is rooted in childhood issues, such as abuse or neglect. Often the person can't help himself—he actual believes his delusions of being superior to others. Remember that Narcissistic Personality Disorder (NPD) is classified as a mental illness.
Avoid affirming the person's delusions. Do not agree with her wild fantasies about how great she is—it will give her a reason to continue and it could make the behavior worse over time.
Ignore the person whenever possible. A narcissist feeds off attention from others. When the person starts talking about himself excessively, the best thing to do is just walk away—leave the situation.
Avoid telling the person that he is a narcissist directly. He will likely resist and withdraw from you, and possibly even resent you for the accusation. This is a diagnosis that you must leave up to a professional.
Have reasonable expectations about the person and his ability to stop being self-absorbed. This is not a disorder that goes away on its own—often the person will need intensive counseling to deal with his narcissism. Suggest counseling if you are in a close relationship with the person, such as a marriage. While he may not be able to stop the behavior completely, his condition may improve with treatment.
Stay positive and strong-minded. A narcissist can be a drain on his friends and family and will often put others down as a way of building himself up. It is important to have high self-esteem yourself, so that you do not start to believe and absorb what he says as if it is the truth.
If you make an agreement with a person who has narcissistic tendencies, be sure to get the agreement in writing. This way it is legally binding—she cannot change and bend the conditions frequently to suit her lofty requirements.