Schizophrenia and bipolar disorder are among the leading causes of disability, morbidity, and mortality worldwide. In addition to being serious mental illnesses, these disorders are associated with considerable systemic physiological dysfunction, including chronic inflammation and elevated oxidative stress. The advent of sophisticated sequencing techniques has led to a growing interest in the potential role of gut microbiota in human health and disease. Advances in this area have transformed our understanding of a number of medical conditions and have generated a new perspective suggesting that gut microbiota might be involved in the development and maintenance of brain/mental health. Animal models have demonstrated strong though indirect evidence for a contributory role of intestinal microbiota in psychiatric symptomatology and have linked the microbiome with neuropsychiatric conditions. We present a systematic review of clinical studies of microbiome in schizophrenia and bipolar disorder. The published literature has a number of limitations; however, the investigations suggest that these disorders are associated with reduced microbial diversity and show global community differences compared to non-psychiatric comparison samples. In some reports, specific microbial taxa were associated with clinical disease characteristics, including physical health, depressive and psychotic symptoms, and sleep, but little information on the functional potential of those community changes. Studies also suggest increased intestinal inflammation and permeability, which may be among the principal mechanisms by which microbial dysbiosis impacts systemic physiological functioning. We highlight gaps in the current literature and implications for diagnosis and therapeutic interventions, and outline future directions for microbiome research in psychiatry.