There is considerable variation in the individualized response to psychotropic drug therapies, which include antidepressants, antipsychotics and mood stabilizers. It has been proposed that the wide interindividual variability in psychotropic drug-response may be attributable to genetic variants. Thus pharmacogenetics may help to accurately predict response to psychotropic treatment, and may be used as guidelines in selecting an appropriate psychotropic treatment in order to maximize drug efficacy and minimize drug toxicity. Although the clinical utility of psychiatric pharmacogenetics is very promising, its adoption in clinical practice has been slow. This resistance may stem from sometimes conflicting findings among pharmacogenetic studies. The failure to replicate these findings may result from a lack of high-quality studies and unresolved methodological issues. In this review we will address methodological and statistical challenges in pharmacogenetic studies and summarize the current pharmacogenetic literature on psychotropic drug-response.