There is now a relatively good understanding of the broad range of direct and indirect effects of humor and laughter on perceptions, attitudes, judgments and emotions, which can potentially benefit the physical and psychological state. This article presents a review and discussion of the use of humor and laughter in treating people with serious mental illness, distinguishing between clinical papers on individual and group psychotherapy, and empirical research reports describing humor and laughter interventions. In spite of the exponential growth of the field over the last 30 years, I conclude that empirical studies are still lacking, the studies that do exist have major methodological shortcomings, and the field is in dire need of further investigation.