There has recently been a renewal of interest in psychedelic research on the use of psilocybin in psychiatric treatment and, in particular, for the treatment of major depressive disorder (MDD). Several state-of-the-art studies have provided new insight into the mechanisms of action of psilocybin and its therapeutic potential. Nevertheless, many questions remain unanswered. With this review, we provide an overview of the current state of research on the potential mechanisms of psilocybin, its antidepressant potential, and the associated risks and adverse effects, to provide an update on a controversial topic discussed in psychopharmacology. A database search was conducted in Medline including articles on psilocybin over the period of the last 20 years. Despite the promising progress in understanding the mechanisms of psilocybin, the exact antidepressive mechanism and the role of the psychedelic experience remain elusive. The studies included in this review found high treatment effect sizes for psilocybin as an antidepressant. However, the results must be regarded as preliminary due to several limitations. Although the current studies observed no severe adverse events, several questions regarding safety and utility remain and must be subject of future research.