Transcranial magnetic stimulation (TMS) has been applied to a growing number of psychiatric disorders as a noninvasive probe to study the underlying neurobiologic processes involved in psychiatric disorders and as a putative treatment. Transcranial magnetic stimulation is unparalleled in its ability to test the hypotheses generated by functional neuroimaging studies by modulating activity in selected neural circuits. As a focal intervention that may in some cases exert lasting effects, TMS offers the hope of targeting and ameliorating the circuitry underlying psychiatric disorders. The ultimate success of such an approach depends on our knowledge of the neural circuitry underlying these disorders, of how TMS exerts its effects, and of how to control the application of TMS to exert the desired effects. Although most clinical trials have focused on the treatment of major depression, increasing attention has been paid to schizophrenia and anxiety disorders. Many of these trials have supported a significant effect of TMS, but in some studies the effect is small and short lived. Current challenges in the field include determining how to enhance the efficacy of TMS in these disorders and how to identify patients for whom TMS may be efficacious.