Evidence on the use of simulation to teach psychiatry and mental health (including addiction) content is emerging, yet no summary of the implementation processes or associated outcomes exists. The aim of this study was to systematically search and review empirical literature on the use of psychiatry-focused simulation in undergraduate nursing education. Objectives were to (i) assess the methodological quality of existing evidence on the use of simulation to teach mental health content to undergraduate nursing students, (ii) describe the operationalization of the simulations, and (iii) summarize the associated quantitative and qualitative outcomes. We conducted online database (MEDLINE, Embase, ERIC, CINAHL, PsycINFO from January 2004 to October 2015) and grey literature searches. Thirty-two simulation studies were identified describing and evaluating six types of simulations (standardized patients, audio simulations, high-fidelity simulators, virtual world, multimodal, and tabletop). Overall, 2724 participants were included in the studies. Studies reflected a limited number of intervention designs, and outcomes were evaluated with qualitative and quantitative methods incorporating a variety of tools. Results indicated that simulation was effective in reducing student anxiety and improving their knowledge, empathy, communication, and confidence. The summarized qualitative findings all supported the benefit of simulation; however, more research is needed to assess the comparative effectiveness of the types of simulations. Recommendations from the findings include the development of guidelines for educators to deliver each simulation component (briefing, active simulation, debriefing). Finally, consensus around appropriate training of facilitators is needed, as is consistent and agreed upon simulation terminology.