A classification is as good as its theory. As the etiology of psychiatric disorders is still not clearly known, we still define them categorically by their clinical syndrome. There are doubts if they are valid discrete disease entities and if dimensional models are better to study them. We have come a long way till ICD-10 and DSM-IV, but there are shortcomings. With advances in genetics and neurobiology in the future, classification of psychiatric disorders should improve further. The concept, evolution, current status and challenges facing psychiatric classification are discussed in this review.