Prime editing, a novel clustered regularly interspaced short palindromic repeats (CRISPR)-based technology, fuses a reverse transcriptase (RT) to an engineered CRISPR-associated protein 9 (Cas9) and uses a prime editing guide RNA (pegRNA)-encoded template. It enables precise base substitutions, small insertions, and deletions without introducing double-strand breaks, thereby expanding the range of correctable mutations while reducing undesired repair outcomes. This technology offers a promising strategy for genomic correction in the nervous system. Here, we review the development of prime editing, its mechanistic rationale, and emerging preclinical evidence that supports its application in neuropsychiatric disorders. We discuss key biological and technological barriers, including limited editing efficiency in post-mitotic neurons, complex pegRNA design, reverse transcription-related errors, vector payload limitations, and blood-brain barrier (BBB) penetration. Nevertheless, in vitro and in vivo studies have demonstrated proof-of-concept correction and functional rescue in several monogenic neurodevelopmental disorders. Advances such as split-adeno-associated virus (AAV) systems, lipid nanoparticles, engineered peptides, and compact Cas variants are actively expanding their therapeutic potential. Further clinical translation will rely on improved editors with guide engineering, BBB-penetrant and neuron-targeted delivery platforms, transient or cell-type-specific expression strategies, and comprehensive genome-wide safety evaluations.