Diffuse reflectance spectroscopy (DRS) has been utilized to study biological tissues for a variety of applications. However, many DRS systems are not designed for handheld use and/or relatively expensive which limit the extensive clinical use of this technique. In this paper, we report a handheld, low-cost DRS system consisting of a light source, optical switch, and a spectrometer, that can precisely quantify the optical properties of tissue samples in the clinical setting. The handheld DRS system was employed to determine the skin chromophore concentrations, absorption and scattering properties of 11 patients with psoriasis. The measurement results were compared to the clinical severity of psoriasis as evaluated by dermatologist using PASI (Psoriasis Area and Severity Index) scores. Our statistical analyses indicated that the handheld DRS system could be a useful non-invasive tool for objective evaluation of the severity of psoriasis. It is expected that the handheld system can be used for the objective evaluation and monitoring of various skin diseases such as keloid and psoriasis.