Recently, a dissociative subtype of post-traumatic stress disorder (PTSD) has been included in the DSM-5. This review focuses on the clinical and neurobiological features that distinguish the dissociative subtype of PTSD from non-dissociative PTSD. Clinically, the dissociative subtype of PTSD is associated with high PTSD severity, predominance of derealization and depersonalization symptoms, a more significant history of early life trauma, and higher levels of comorbid psychiatric disorders. Furthermore, PTSD patients with dissociative symptoms exhibit different psychophysiological and neural responses to the recall of traumatic memories. While individuals with non-dissociative PTSD exhibit an increased heart rate, decreased activation of prefrontal regions, and increased activation of the amygdala in response to traumatic reminders, individuals with the dissociative subtype of PTSD show an opposite pattern. It has been proposed that dissociation is a regulatory strategy to restrain extreme arousal in PTSD through hyperinhibition of limbic regions. In this research update, promises and pitfalls in current research studies on the dissociative subtype of PTSD are listed. Inclusion of the dissociative subtype of PTSD in the DSM-5 stimulates research on the prevalence, symptomatology, and neurobiology of the dissociative subtype of PTSD and poses a challenge to improve treatment outcome in PTSD patients with dissociative symptoms.