Psychotherapy is one of the major methods of treatment in the mental health field. A review of the literature suggests that some forms of psychotherapy are evidence-based. Findings from hundreds of meta-analytic studies indicate that psychotherapy can often achieve outcomes that are clinically meaningful and may also contribute to cost savings. This review contains findings pertaining to the main psychotherapy approaches: the psychodynamic, the cognitive-behavioral (CBT) and the dialectical-behavioral (DBT). The findings suggest that there is ample evidence on the effectiveness of CBT in the treatment of various mental disorders. There is also an accumulating body of evidence suggesting that short-term psychodynamic psychotherapy is effective in the treatment of mental disorders except for psychosis and schizophrenia. On the other hand, there are only preliminary findings supporting the effectiveness of DBT and questions remain concerning the cost-effectiveness of this labor-intensive treatment technique. Similarly, there are only preliminary results that long-term psychodynamic psychotherapy is effective in the treatment of complex mental disorders. Recent technological advances in the measurement of psychotherapy outcome were reviewed. These include methods of tracking changes throughout the course of treatment and computer-assisted programs designed to generate on-going feedback to the therapist. These techniques are designed to improve outcome by focusing the psychotherapy on clearly defined objectives and by the use of measures aimed at reducing negative reactions to treatment and lowering the risk of premature termination of treatment by clients. The authors conclude by proposing guidelines for evidence-based care policy for the public sector based outpatient psychotherapy in Israel.