Therapeutic Drug Monitoring (TDM) is a valid tool to optimise pharmacotherapy. It enables the clinician to adjust the dosage of drugs according to the characteristics of the individual patient. In psychiatry, TDM is an established procedure for lithium, some antidepressants and antipsychotics. In spite of its obvious advantages, however, the use of TDM in everyday clinical practice is far from optimal. The interdisciplinary TDM group of the Arbeitsgemeinschaft fur Neuropsychopharmakologie und Pharmakopsychiatrie (AGNP) has therefore worked out consensus guidelines to assist psychiatrists and laboratories involved in psychotropic drug analysis to optimise the use of TDM of psychotropic drugs. Five research-based levels of recommendation were defined with regard to routine monitoring of plasma concentrations for dose titration of 65 psychoactive drugs: (1) strongly recommended, (2) recommended, (3) useful, (4) probably useful and (5) not recommended. A second approach defined indications to use TDM, e. g. control of compliance, lack of clinical response or adverse effects at recommended doses, drug interactions, pharmacovigilance programs, presence of a genetic particularity concerning the drug metabolism, children, adolescents and elderly patients. Indications for TDM are relevant for all drugs either with or without validated therapeutic ranges. When studies on therapeutic ranges are lacking, target ranges should be plasma concentrations that are normally observed at therapeutic doses of the drug. Therapeutic ranges of plasma concentrations that are considered to be optimal for treatment are proposed for those drugs, for which the evaluation of the literature demonstrated strong evidence. Moreover, situations are defined when pharmacogenetic (phenotyping or genotyping) tests are informative in addition to TDM. Finally, practical instructions are given how to use TDM. They consider preparation of TDM, analytical procedures, reporting and interpretation of results and the use of information for patient treatment. Using the consensus guideline will help to ensure optimal clinical benefit of TDM in psychiatry.