The aim of this review article is to assess the connection between psychological stress and sex hormones and their effect on the development of autoimmune diseases. Psychological stress describes what people feel when they are under mental, physical, or emotional pressure. We searched for online articles using MEDLINE®, Embase, Cochrane Library and Google Scholar. Our research yielded a total of 165 articles out of which 30 articles were considered for further perusal. The articles were reviewed from February 2016 to February 2017. Case reports and patients suffering from hematolymphoid malignancies and active infections were excluded from the review. Estrogen and testosterone are potential physiological regulatory factors for the peripheral development of CD4+CD25+ T regulatory cells. Stress at any age leads to the depletion of estrogen and testosterone stores in the body, leading to the loss of expansion of T regulatory cells, making the immature B cells evade the negative selection at the germinal center, or in other words, leading to the loss of central tolerance, a triggering event in autoimmune diseases like systemic lupus erythematosus. Autoimmune diseases in women are most likely due to changes in estrogen levels during mental, physical, pre-menopausal, post-menopausal, and pregnancy-induced stress. We conclude that modulating estrogen in females (pre-menopausal and post-menopausal) and testosterone in males can be used to treat stress-related immune imbalance resulting in autoimmune diseases in both sexes.