Inositol is a natural sugar-like compound, commonly present in many plants and foods. It is involved in several biochemical pathways, most of them controlling vital cellular mechanisms, such as cell development, signaling and nuclear processes, metabolic and endocrine modulation, cell growth, signal transduction, etc. In this narrative review, we focused on the role of inositol in human brain physiology and pathology, with the aim of providing an update on both potential applications and current limits in its use in psychiatric disorders. Overall, imaging and biomolecular studies have shown the role of inositol levels in the pathogenesis of mood disorders. However, when administered as monotherapy or in addition to conventional drugs, inositol did not seem to influence clinical outcomes in both mood and psychotic disorders. Conversely, more encouraging results have emerged for the treatment of panic disorders. We concluded that, despite its multifaceted neurobiological activities and some positive findings, to date, data on the efficacy of inositol in the treatment of psychiatric disorders are still controversial, partly due to the heterogeneity of supporting studies. Therefore, systematic use of inositol in routine clinical practice cannot be recommended yet, although further basic and translational research should be encouraged.