Psychodrama is an action method, often used as a psychotherapy, in which clients use spontaneous dramatization, role playing, and dramatic self-presentation to investigate and gain insight into their lives.

Developed by Jacob L. Moreno and his wife Zerka Toeman Moreno, psychodrama includes elements of theater, often conducted on a stage, or a space that serves as a stage area, where props can be used. A psychodrama therapy group, under the direction of a licensed psychodramatist, reenacts real-life, past situations (or inner mental processes), acting them out in present time. Participants then have the opportunity to evaluate their behavior, reflect on how the past incident is getting played out in the present and more deeply understand particular situations in their lives.

Psychodrama offers a creative way for an individual or group to explore and solve personal problems. It may be used in a variety of clinical and community-based settings in which other group members (audience) are invited to become therapeutic agents (stand-ins) to populate the scene of one client.

Besides benefits to the designated client, "side-benefits" may accrue to other group members, as they make relevant connections and insights to their own lives from the psychodrama of another.

A psychodrama is best conducted and produced by a person trained in the method, called a psychodrama director.

In a session of psychodrama, one client of the group becomes the protagonist, and focuses on a particular, personal, emotionally problematic situation to enact on stage. A variety of scenes may be enacted, depicting, for example, memories of specific happenings in the client's past, unfinished situations, inner dramas, fantasies, dreams, preparations for future risk-taking situations, or unrehearsed expressions of mental states in the here and now. These scenes either approximate real-life situations or are externalizations of inner mental processes. Other members of the group may become auxiliaries and support the protagonist by playing other significant roles in the scene, or they may step in as a "double" who plays the role of the protagonist.

A core tenet of psychodrama is Moreno's theory of "spontaneity-creativity". Moreno believed that the best way for an individual to respond creatively to a situation is through spontaneity, that is, through a readiness to improvise and respond in the moment. By encouraging an individual to address a problem in a creative way, reacting spontaneously and based on impulse, they may begin to discover new solutions to problems in their lives and learn new roles they can inhabit within it. Moreno's focus on spontaneous action within the psychodrama was developed in his Theatre of Spontaneity, which he directed in Vienna in the early 1920s. Disenchanted with the stagnancy he observed in conventional, scripted theatre, he found himself interested in the spontaneity required in improvisational work. He founded an improvisational troupe in the 1920s. This work in the theatre impacted the development of his psychodramatic theory.