Differences in physiological trait or state characteristics of the organism are ultimately responsible for the wide range of interindividual variability in the clinical response to psychoactive drugs. Event-related potentials (ERPs) appear especially valuable in assessing these physiological characteristics, and might therefore be useful as predictors of the individual drug response. Seven criteria for the selection of potential predictor variables are presented. A review of the literature reveals consistent, prospective and cross-validated results concerning the prediction of the clinical response to psychostimulants in hyperkinetic children. Consistent findings have also been reported concerning the relationship between ERPs and the antidepressive as well as prophylactic effects of lithium. Relating to other aspects of drug therapy in psychiatry, there have been isolated studies describing ERP differences between responders and nonresponders. It is concluded that the use of ERPs in the prediction of differential drug response is a promising research strategy, deserving more attention. Its relevance will be seen not only in its practical value for therapeutic decisions, but also in the clarification of therapeutic mechanisms.