The microbiota-gut-brain axis (MGBA) has emerged as a key framework for understanding how peripheral biological systems influence brain function and behaviour. However, despite extensive associative evidence linking gut microbiome to psychiatric disorders, robust causal and mechanistic insights remain limited. This review critically evaluates current evidence to determine whether microbiome alterations contribute to psychiatric pathophysiology and inform therapeutic strategies. We outline methodological frameworks for causal inference, highlighting the limitations of cross-sectional designs and the need for convergent evidence from longitudinal studies, experimental models, and human genetic approaches. We then synthesize mechanistic pathways linking the microbiota to brain function, including immune signaling, neuroendocrine regulation via the hypothalamic-pituitary-adrenal (HPA) axis, neural communication through vagal and enteric pathways, and intestinal and blood-brain barrier (BBB) integrity. Across these systems, microbial metabolites and immune mediators emerge as key mediators, although direct causal mechanisms in humans remain incompletely established. Disorder-specific evaluation across major depressive disorder (MDD), anxiety disorders, bipolar disorder (BD), schizophrenia (SCZ), and post-traumatic stress disorder (PTSD) reveals heterogeneous but converging evidence for microbiome involvement. Although preclinical and interventional studies support biological plausibility, human evidence remains constrained by confounding, variability, and limited mechanistic validation. Translational strategies, including psychobiotics, dietary interventions, fecal microbiota transplantation (FMT), and microbiome-based biomarkers, show promise but remain methodologically limited. Overall, the gut microbiome represents a biologically plausible and modifiable contributor to psychiatric disorders. Advancing toward clinical application will require integrative, longitudinal, and mechanism-driven research to enable precision psychiatry grounded in causal evidence.