Psychosis is generally defined as a serious mental condition wherein a person loses touch with reality. This occurs together with changes in behaviour and personality.

Alcohol is a neurotoxin that has a complex effect on the brain. It can induce psychosis in people who are very drunk or who are withdrawing from chronic alcohol abuse. Chronic alcohol abuse can also result in neurological damage. Repeatedly going through a cycle of heavy drinking and withdrawing from alcohol can be quite dangerous.

Intoxication from alcohol (being drunk) results in the drinker feeling disinhibited and drowsy. It also has an anesthetic effect. The sedative effect is generated by GABA depression of the cerebral cortex and a system known as the reticular activating system which is responsible for keeping the brain "awake".

People can become physically dependent on alcohol after prolonged use. In such cases withdrawing from alcohol by stopping drinking results in changes in brain chemistry that may lead to psychosis. This is aggravated by a Thiamine (vitamin B1) deficiency which is associated with a form of withdrawal psychosis known as Wernicke-Korsakoff syndrome.

Luckily alcohol-related psychosis will dissipate once the alcoholic stops drinking. This is one way in which this form of psychosis can be differentiated from psychosis arising from other conditions such as schizophrenia (abstinence from alcohol will not relieve schizophrenic psychosis). Alcohol-related psychosis may reoccur should the alcoholic start drinking again.

In some people, particularly the elderly and those with impaired impulse control, it is possible that just a tiny amount of alcohol will induce a condition known as "alcohol idiosyncratic intoxication". This produces intoxication that results in cognitive deficits, hallucinations, illusions, and delusions. Such an episode can last up to a few hours and the sufferer will not remember anything that has happened.

Current medical thought suggests that alcohol-related psychosis is related to the limbic system. This system in the brain is a collection of regions that (generally speaking) is responsible for processing memory and emotions.