The role of stress in precipitating psychotic episodes in schizophrenia and bipolar disorder has long been acknowledged. However, the neurobiological mechanism/s of this association have remained elusive. Current neurodevelopmental models of psychosis implicate early dysfunction in biological systems regulating hypothalamic-pituitary-adrenal axis and immune function, with long-term effects on the development of the brain networks responsible for higher order cognitive processes and stress reactivity in later life. There is also increasing evidence of childhood trauma in psychosis, and its impact on the development of brain systems regulating stress. These findings are emerging in the context of a new era of epigenetic methods facilitating the study of environmental effects on gene expression. The evidence is thus converging: exposure to stress at critical periods in life may be an important factor in the development of the brain dysfunction that represents psychosis vulnerability, rather than merely interacting with an independent 'biological vulnerability' to manifest in psychosis.