Atopic dermatitis (AD) is a common chronic inflammatory skin condition characterised by pruritus and recurrent eczematous patches and plaques. It impacts sleep and its visibility can lead to stigmatisation, low self-esteem, social withdrawal, reduced quality of life (QOL), and psychological burden. This study explores the relationship between AD and mental health, including possible causation pathways. A literature review was conducted in PubMed without using limiters. AD carries higher odds of suicidality and an increased risk of depression, anxiety, alexithymia, and obsessive–compulsive disorder (OCD) across all severities. While some studies report an association of AD with attention deficit hyperactivity disorder (ADHD), and possibly autism spectrum disorder (ASD), others do not. There is increasing evidence that AD contributes to chronic low-grade inflammation and cognitive impairment (CI). Causative factors for mental health complications of AD likely include both psychosocial and biological variables. AD is associated with higher levels of cutaneous and circulating proinflammatory cytokines; these can breach the blood–brain barrier and trigger central nervous system events, including oxidative stress, neurotransmitter breakdown, altered serotonin metabolism, and reduced neurogenesis in several brain regions. Excessive inflammation in AD may thus contribute to CI, depression, and suicidality. AD providers should be vigilant about mental health.