Purpose of review Magnetoencephalography (MEG) has been available for over 30 years, but the past 10 years have seen serious investigation of its use as a clinical tool. It is therefore an opportune time to review how MEG is able to contribute to neuropsychiatric research and practice. Recent findings We limit this review to the areas of dementia, schizophrenia, depression and autism. MEG can achieve correct classification of individuals with mild cognitive impairment versus Alzheimer's disease, may identify a marker of early disease in schizophrenia, can distinguish bipolar from major depressive disorder, and has been used to study cognitive and other deficits in autism. It provides a valuable tool to study cognitive dysfunction. Summary The most important aspect of MEG is the ability to record neural activity with millisecond precision, allowing coherence analysis of neural data to examine how brain areas are synchronized. Such synchrony is thought to underlie cognitive processes. As cognitive dysfunction is a common marker of neuropsychiatric disorders, MEG is emerging as an important investigatory tool in neuropsychiatry. It may also be useful clinically for early or differential diagnosis of some neuropsychiatric disorders, or for the prediction of drug effects, but more research is necessary before this becomes a clinical reality.