Transcranial alternating current stimulation (tACS) is a unique form of non-invasive brain stimulation. Sinusoidal alternating electric currents are delivered to the scalp to affect mostly cortical neurons. tACS is supposed to modulate brain function and, in turn, cognitive processes by entraining brain oscillations and inducing long-term synaptic plasticity. Therefore, tACS has been investigated in cognitive neuroscience, but only recently, it has been also introduced in psychiatric clinical trials. This review describes current concepts and first findings of applying tACS as a potential therapeutic tool in the field of psychiatry. The current understanding of its mechanisms of action is explained, bridging cellular neuronal activity and the brain network mechanism. Revisiting the relevance of altered brain oscillations found in six major psychiatric disorders, putative targets for the management of mental disorders using tACS are discussed. A systematic literature search on PubMed was conducted to report findings of the clinical studies applying tACS in patients with psychiatric conditions. In conclusion, the initial results may support the feasibility of tACS in clinical psychiatric populations without serious adverse events. Moreover, these results showed the ability of tACS to reset disturbed brain oscillations, and thus to improve behavioural outcomes. In addition to its potential therapeutic role, the reactivity of the brain circuits to tACS could serve as a possible tool to determine the diagnosis, classification or prognosis of psychiatric disorders. Future double-blind randomised controlled trials are necessary to answer currently unresolved questions. They may aim to detect response predictors and control for various confounding factors.