Ketamine, a noncompetitive NMDA receptor antagonist, has been exclusively used as an anesthetic in medicine and has led to new insights into the pathophysiology of neuropsychiatric disorders. Clinical studies have shown that low subanesthetic doses of ketamine produce antidepressant effects for individuals with depression. However, its use as a treatment for psychiatric disorders has been limited due to its reinforcing effects and high potential for diversion and misuse. Preclinical studies have focused on understanding the molecular mechanisms underlying ketamine's antidepressant effects, but a precise mechanism had yet to be elucidated. Here we review different hypotheses for ketamine's mechanism of action including the direct inhibition and disinhibition of NMDA receptors, AMPAR activation, and heightened activation of monoaminergic systems. The proposed mechanisms are not mutually exclusive, and their combined influence may exert the observed structural and functional neural impairments. Long term use of ketamine induces brain structural, functional impairments, and neurodevelopmental effects in both rodents and humans. Its misuse has increased rapidly in the past 20 years and is one of the most common addictive drugs used in Asia. The proposed mechanisms of action and supporting neuroimaging data allow for the development of tools to identify 'biotypes' of ketamine use disorder (KUD) using machine learning approaches, which could inform intervention and treatment.