Purpose: Psychodynamic psychotherapy is one of the most frequently applied methods of psychotherapy in clinical practice. However, it is the subject of controversial discussion, especially with regard to empirical evidence. In this article we aim to give an up-to-date description of the treatment and to review the available empirical evidence. Evidence is reviewed for both efficacy and mechanisms of change of short- and moderate-term psychodynamic psychotherapy. Furthermore, results of effectiveness studies of long-term psychoanalytic therapy are reviewed. Methods: With regard to efficacy, a protocol for a Cochrane review for (short-term) psychodynamic psychotherapy is available specifying inclusion criteria for efficacy studies. Results: Twenty-three randomized controlled trials of manual-guided psychodynamic psychotherapy applied in specific psychiatric disorders provided evidence that psychodynamic psychotherapy is superior to control conditions (treatment-as-usual or wait list) and, on the whole, as effective as already established treatments (e.g. cognitive-behavioural therapy) in specific psychiatric disorders. With regard to process research, central assumptions of psychodynamic psychotherapy were confirmed by empirical studies. Conclusions: Further research should include both efficacy studies (on specific forms of psychodynamic psychotherapy in specific mental disorders) and effectiveness studies complementing the results from experimental research settings. Future process research should address the complex interactions among interventions, patient's level of functioning, helping alliance and outcome.