This paper reviews the literature on positive psychology with a special focus on people with mental illness. It describes the characteristics, critiques, and roots of positive psychology and positive psychotherapy, and summarises the existing evidence on positive psychotherapy. Positive psychology aims to refocus psychological research and practice on the positive aspects of experience, strengths, and resources. Despite a number of conceptual and applied research challenges, the field has rapidly developed since its introduction at the turn of the century. Today positive psychology serves as an umbrella term to accommodate research investigating positive emotions and other positive aspects such as creativity, optimism, resilience, empathy, compassion, humour, and life satisfaction. Positive psychotherapy is a therapeutic intervention that evolved from this research. It shows promising results for reducing depression and increasing well-being in healthy people and those with depression. Positive psychology and positive psychotherapy are increasingly being applied in mental health settings, but research evidence involving people with severe mental illness is still scarce. The focus on strengths and resources in positive psychology and positive psychotherapy may be a promising way to support recovery in people with mental illness, such as depression, substance abuse disorders, and psychosis. More research is needed to adapt and establish these approaches and provide an evidence base for their application.