Therapeutic misconception (TM) denotes the phenomenon in which research subjects conflate research purpose, protocols and procedures with clinical treatment. We examined the prevalence, contributory factors, clinical associations, impact, and collated solutions on TM within psychiatric research, and made suggestions going ahead. Literature search for relevant empirical research papers was conducted until February 2015. Eighty-eight reports were extracted, of which 31 were selected, summarised into different headings for discussion of implications and collated solutions of TM. We found variable and high rates of TM (ranging from 12.5% to 86%) in some psychiatry research populations. Contributory factors to TM included perceived medical roles of researchers, media, research setting and subject factors. Greater TM in affective, neurodevelopmental and psychotic spectrum conditions were associated with demographic variables (such as lower education, increased age), clinical factors (such as poor insight, cognitive deficits, increased symptoms, poorer self-rated quality of health), and social functioning (such as decreased independence). Inattention to TM may lead to frustration, negative impression and abandonment of participation in psychiatry research. Strategies such as the employment of a neutral educator during the informed consent process and education modules may be effective in addressing TM. Further research is warranted to examine the different TM facets, specific clinical correlates and more effective management strategies.