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OBJECTIVE: In response to new developments and interest in the area of telepsychiatry, literature on this topic has greatly increased over the past three years. Because of this increase, the authors conducted a literature review of telepsychiatry to update a previously published review that covered the years 1970 to 2000. METHODS: A search was conducted on the MEDLINE, PsycINFO, and Telemedicine Information Exchange (TIE) databases for literature published from March 2000 to March 2003 on telepsychiatry applications, using the following terms: telepsychiatry, telepsychology, telemental health, videoconferencing, and video conferencing. RESULTS: Sixty-eight publications were identified over this three-year period, exceeding the 63 publications identified in the previous literature review. The authors summarize the results of findings in six areas: novel clinical demonstrations and current program descriptions; the reliability of clinical assessments; clinical outcomes; satisfaction of patients and clinicians; cost and cost-effectiveness; and legal, regulatory, and ethical issues. Studies describing existing programs and novel clinical applications support the belief that the use of telepsychiatry is expanding. Overall, studies continued to support the notion that telepsychiatry assessments can produce reliable results, telepsychiatric services can lead to improved clinical status, and patients and clinicians are satisfied with treatment delivered via telepsychiatry. Evidence supported the notion that telepsychiatry is a cost-effective means of delivering mental health services; however, this conclusion was based on limited studies of economic models of telepsychiatry programs. Also limited were papers on the topics of legal, regulatory, and ethical issues. CONCLUSIONS: Despite the rapid increase in information on telepsychiatry, methodologically sound studies in the area of telepsychiatry are still infrequent.