Objectives: The benefit and potential mechanisms of action of homeopathy have long been debated. Almost entirely neglected has been the study of individualized homeopathy (IH) as a form of psychotherapy, which incorporates factors that are common to most therapies while using processes that are specific to IH. Methods: Recent research into the therapeutic components of IH is reviewed; similarities and differences between IH and other forms of psychotherapy are also described. Results: IH includes elements found in humanistic therapy and narrative medicine and additionally incorporates idiographic material in treatment selection. It is structured in a manner that takes maximum advantage of the components of the placebo effect, which could further expand its effectiveness beyond those conditions thought usually amenable to psychotherapy. Conclusions: It is possible that IH entails specific psychotherapeutic processes in addition to possible therapeutic action of the homeopathic remedy, but the relative contributions of each remain to be determined. Suggestions are given for future research.