Neuroimaging is a powerful tool for the study of the neurobiological changes in psychiatric disorders. Functional magnetic resonance imaging (MRI) is a noninvasive method that assesses cortical activation by measuring changes in the local concentration of deoxyhemoglobin, which is paramagnetic and therefore can be detected using MRI. This method has been referred to as blood oxygen level-dependent imaging. This article discusses the application of functional MRI techniques, with emphasis on blood oxygen level-dependent imaging, to the study of psychiatric diseases. The first part of the article provides an overview of the contribution of functional MRI research to the current understanding of mood disorders, schizophrenia, and substance abuse. The last part reviews recent advances and highlights future directions for the use of the functional MRI technique for psychiatric research.