Psilocybin, a naturally occurring hallucinogenic substance present in certain mushrooms, has drawn growing attention as a therapeutic breakthrough for several mental and psychiatric conditions. Psilocybin originated in spiritual and cultural traditions and has become the focus of extensive scientific research. This meta-analysis and systematic review aggregate results from the literature to evaluate the therapeutic function of psilocybin following PRISMA 2020. Although it is now used to treat addiction, end-of-life anxiety, and treatment-resistant depression, new research indicates that it could additionally be used to treat obsessive-compulsive disorder, eating disorders, and neurodegenerative diseases. Psilocybin's regulation of serotonin 5-HT2A receptors, which improves neuroplasticity, disrupts maladaptive cognitive processes and encourages emotional integration, is the backend of its therapeutic benefits. The meta-analysis results indicate that psilocybin has an outstanding capacity to reduce the symptoms of anxiety/MDD (SMD = -1.438, 95 % CI: -1.729 to -1.146, p < 0.001) and mood disorders (SMD = -1.476, 95 % CI: -1.773 to -1.178, p < 0.001). Sustained improvements are frequently observed after a single therapy session. The results of this meta-analysis and systematic review highlight psilocybin's potential as a potent and immediate treatment for mental health issues that are difficult to treat. Although the results are resistant to publication bias (fail-safe N > 5500), they highlight the significance of addressing unsolved hurdles to clinical adoption and customizing therapies for particular groups. Psilocybin has the potential to transform psychiatry and give millions of people suffering from crippling mood disorders fresh hope as research progresses and regulations change.