Simulation-based medical education (SBME) provides experiential learning for medical trainees without any risk of harm to patients. Simulation is now included in most medical school and residency curricula. In psychiatric education, simulation programs are rapidly expanding and innovating. Major applications of SBME in psychiatry include achieving close observation of trainees with patients, preparing trainees for unstable patient scenarios, and exposing trainees to a broader range of psychopathology. This review article covers the history of SBME, simulation modalities, current use of SBME in psychiatry, a case study from one institution, and recommendations for incorporating simulation in psychiatry education.