This systematic review aimed to critically appraise published clinical trials designed to assess the effect of Tai Chi on psychosocial well-being. Databases searched included MEDLINE, CINAHL, EMBASE, HEALT, PsycINFO, CISCOM, the Cochrane Central Register of Controlled Trials of the Cochrane Library, and dissertations and conference proceedings from inception to August 2008. Methodological quality was assessed using a modified Jadad scale. A total of 15 studies met the inclusion criteria (i.e. English publications of randomized controlled trials with Tai Chi as an intervention and psychological well-being as an outcome measure), of which eight were high quality trials. The psychosocial outcomes measured included anxiety (eight studies), depression (eight studies), mood (four studies), stress (two studies), general mental health three studies), anger, positive and negative effect, self-esteem, life satisfaction, social interaction and self-rated health (one study each). Tai Chi intervention was found to have a significant effect in 13 studies, especially in the management of depression and anxiety. Although the results seemed to suggest Tai Chi is effective, they should be interpreted cautiously as the quality of the trials varied substantially. Furthermore, significant findings were shown in only six high quality studies. Moreover, significant between group differences after Tai Chi intervention was demonstrated in only one high quality study (the other three significant results were observed in non-high quality studies). Two high quality studies in fact found no significant Tai Chi effects. It is still premature to make any conclusive remarks on the effect of Tai Chi on psychosocial well-being.