Even in the early part of the 20th century, mental illness was almost a sentence of doom, and mentally ill persons were handled with cruel confinement and little medical aid. In the latter half of the century, successful therapy for some mental illnesses has greatly improved the prognosis for these diseases and has partly removed their stigma.

The theories advanced by Austrian physician Sigmund Freud were among the first attempts to understand malfunctioning of the mind, but the methods of psychoanalysis advocated by Freud and modified by his followers proved ineffective for treating certain serious mental illnesses. Two early attempts to treat psychotic illness were the destruction of parts of the brain in a procedure called lobotomy, introduced in 1935, and electroconvulsive therapy, devised in 1938. Lobotomy and less severe forms of psychosurgery are now used only rarely, and electroconvulsive therapy is primarily a treatment for depressive illness that has not responded to drug therapy.

A new era in treatment of schizophrenia, a severe form of mental illness, began in the early 1950s with the introduction of phenothiazine drugs. These drugs led to a new trend, deinstitutionalization, in which patients were released from mental hospitals and treated in the community. Valium and other benzodiazepine drugs went into wide use in the 1970s for treating anxiety and other emotional illness. Late in the century, there was growing awareness about the importance of diagnosing and treating clinical depression, a leading cause of suicide. Advanced imaging techniques that show the structural and functional differences in the brains of people with certain mental illnesses have opened the door for new treatment options.