The potential of noninvasive neurostimulation by repetitive transcranial magnetic stimulation (rTMS) for improving psychiatric disorders has been studied increasingly over the past two decades. This is especially the case for major depression and for auditory-verbal hallucinations in schizophrenia. The present review briefly describes the background of this novel treatment modality and summarizes evidence from clinical trials into the efficacy of rTMS for depression and hallucinations. Evidence for efficacy in depression is stronger than for hallucinations, although a number of studies have reported clinically relevant improvements for hallucinations too. Different stimulation parameters (frequency, duration, location of stimulation) are discussed. There is a paucity of research into other psychiatric disorders, but initial evidence suggests that rTMS may also hold promise for the treatment of negative symptoms in schizophrenia, obsessive compulsive disorder and post-traumatic stress disorder. It can be concluded that rTMS induces alterations in neural networks relevant for psychiatric disorders and that more research is needed to elucidate efficacy and underlying mechanisms of action.