Oxytocin (OXT), produced and secreted in the paraventricular nucleus and supraoptic nucleus of magnocellular and parvocellular neurons. The diverse presence and activity of oxytocin suggests a potential for this neuropeptide in the pathogenesis and treatment of stress-related neuropsychiatric disorders (anxiety, depression and post-traumatic stress disorder (PTSD)). For a more comprehensive understanding of the mechanism of OXT's anti-stress action, the signaling cascade of OXT binding to targeting stress were summarized. Then the advance of OXT treatment in depression, anxiety, PTSD and the major projection region of OXT neuron were discussed. Further, the efficacy of endogenous and exogenous OXT in stress responses were highlighted in this review. To augment the level of OXT in stress-related neuropsychiatric disorders, current biological strategies were summarized to shed a light on the treatment of stress-induced psychiatric disorders. We also conclude some of the major puzzles in the therapeutic uses of OXT in stress-related neuropsychiatric disorders. Although some questions remain to be resolved, OXT has an enormous potential therapeutic use as a hormone that regulates stress responses.