Neuropsin is an extracellular matrix serine protease that governs the proteolytic cleavage of synaptic proteins and consequently synaptic structural plasticity. In the brain, its substrates include the cell adhesion molecules Neuregulin-1 and L1CAM, that have been linked to neurodevelopmental processes and disorders, such as schizophrenia and bipolar disorder. Neuropsin mRNA is abundant in the cerebellum and several peripheral tissues from mid-gestation but is mainly expressed in cortical and limbic tissues postnatally. Differential usage of neuropsin splice forms in the fetal and adult brain has only been reported in humans, suggesting that neuropsin may serve a specialized role in human neurodevelopment. Accordingly, both the expression and proteolytic activity of neuropsin are subject to regulation by neural activity as well as by environmental risk factors associated with mental illness, such as psychophysiological stress. Intriguingly, dysregulation of neuropsin has been reported in depression and Alzheimer’s disease and its implication in mental disorder is supported by genetic and epigenome wide studies. Here we review neuropsin regulation in mental health and provide a summary of clinical and preclinical evidence supporting a role for neuropsin in the pathogenesis of mental disorders.