Psychiatric disorders are a leading cause of disability worldwide and despite significant pharmacologic advances, often remain difficult to diagnose correctly and treat fully. Factors which contribute to these difficulties include imprecise understanding of etiology, syndromal nature of many disorders and overlap in diagnostic criteria between conditions, medical and psychiatric comorbidity and high rates of noncompliance to treatment either due to lack of efficacy or adverse effects. In addition to genetics and known biological factors, the severity and presentation of many psychiatric conditions may be influenced by psychosocial factors, which in turn can affect treatment outcomes. Currently, the selection of medications for a given patient in psychiatry is primarily based on a trial and error process; thus, there is an urgent need to identify biomarkers that can improve diagnostic homogeneity and provide useful prognostic information. Pharmacogenetics has the potential, in combination with other approaches, to enhance both care at an individual level as well as in drug development by improving efficacy and minimizing drug-induced side effects.