Functional stereotaxy was introduced in the late 1940s to reduce the morbidity of lobotomy in psychiatric disease by using more focal lesions. The advent of neuroleptics led to a drastic decline in psychosurgery for several decades. Functional stereotactic neurosurgery has recently been revitalized, starting with treatment of Parkinson's disease, in which deep brain stimulation (DBS) facilitates reversible focal neuromodulation of altered basal ganglia circuits. DBS is now being extended to treatment of neuropsychiatric conditions such as Gilles de la Tourette syndrome, obsessive-compulsive disorder, depression and addiction. In this review, we discuss the concept that dysfunction of motor, limbic and associative cortico-basal ganglia-thalamocortical loops underlies these various disorders, which might now be amenable to DBS treatment.