Psychiatric disorders are clinically heterogeneous and debilitating chronic diseases resulting from a complex interplay between gene variants and environmental factors. Epigenetic processes, such as DNA methylation and histone posttranslational modifications, instruct the cell/tissue to correctly interpret external signals and adjust its functions accordingly. Given that epigenetic modifications are sensitive to environment, stable, and reversible, epigenetic studies in psychiatry could represent a promising approach to better understanding and treating disease. In the present review, we aim to discuss the clinical opportunities and challenges arising from the epigenetic research in psychiatry. Using selected examples, we first recapitulate key findings supporting the role of adverse life events, alone or in combination with genetic risk, in epigenetic programming of neuropsychiatric systems. Epigenetic studies further report encouraging findings about the use of methylation changes as diagnostic markers of disease phenotype and predictive tools of progression and response to treatment. Then we discuss the potential of using targeted epigenetic pharmacotherapy, combined with psychosocial interventions, for future personalized medicine for patients. Finally, we review the methodological limitations that could hinder interpretation of epigenetic data in psychiatry. They mainly arise from heterogeneity at the individual and tissue level and require future strategies in order to reinforce the biological relevance of epigenetic data and its translational use in psychiatry. Overall, we suggest that epigenetics could provide new insights into a more comprehensive interpretation of mental illness and might eventually improve the nosology, treatment, and prevention of psychiatric disorders.