The NLRP inflammasome is a multi-protein complex which mainly consists of the nucleotide-binding oligomerization domain, leucine-rich repeat, and pyrin domain. Its activation is linked to microglial-mediated neuroinflammation and partial neuronal degeneration. Many neuropsychiatric illnesses have increased inflammatory responses as both a primary cause and a defining feature. The NLRP inflammasome inhibition delays the progression and alleviates the deteriorating effects of neuroinflammation on several neuropsychiatric disorders. Evidence on the central effects of the NLRP inflammasome potentially provides the scientific base of a promising drug target for the treatment of neuropsychiatric disorders. This review elucidates the classification, composition, and functions of the NLRP inflammasomes. It also explores the underlying mechanisms of NLRP inflammasome activation and its divergent role in neuropsychiatric disorders, including Alzheimer’s disease, Huntington’s disease, Parkinson’s disease, depression, drug use disorders, and anxiety. Furthermore, we explore the treatment potential of the NLRP inflammasome inhibitors against these disorders.