Although most patients with depression ultimately respond to antidepressant therapy, >50% have inadequate response to an individual antidepressant trial. The desire to avoid adverse drug reactions is common among patients, and is an important determinant of drug selection among psychiatrists. However, since the major classes of antidepressants and antipsychotics appear to be comparable in efficacy, clinicians have little basis for selecting the most effective agent for an individual patient. Pharmacogenetics, often described as the study of genetic variation that explains differential response to medication, represents an important new avenue toward improving treatment outcomes. Genetic variation in drug-metabolizing enzymes has been recognized for decades. The main focus of current psychiatric pharmacogenetic testing is on the cytochrome P450 (CYP) 2D6 and, to a somewhat lesser extent, on the 2C19 genes. Data suggest that poor metabolizer status can be associated with an increased risk of adverse drug reactions with certain medications, and that ultra-rapid metabolizers may require higher-than-usual doses to achieve a therapeutic response. The importance of CYP enzymes in the metabolism of several antidepressant and antipsychotic drugs suggest that genetic variation may aid in medication selection or dosing. Advances in pharmacogenetic research may facilitate the development of personalized medicine in which genetic information can inform drug selection, leading to optimal drug effectiveness and minimal drug toxicity.