Interoception is the perception of signals from inside the body. It plays a significant role in the nervous, cardiovascular, respiratory, gastrointestinal, genitourinary, and endocrine systems. It is also closely related to the autonomic nervous system and inflammatory pathways and plays a significant role in our optimal functioning. Recently, interoception has gained more attention in neuropsychiatric research. Anatomical and physiological aspects of interoception like relevant brain areas, the role of the vagus nerve, and the autonomic nervous system are gradually being understood. Different facets of interoception like interoceptive attention, detection, magnitude, discrimination, accuracy, awareness, and appraisal have been proposed and their assessments and importance are being evaluated. Further, interoception is often dysregulated or abnormal in psychiatric disorders. It has been implicated in the psychopathology, etiopathogenesis, clinical features and treatment of mood, anxiety, psychotic, personality and addiction-related disorders. This narrative review attempts to provide a nuanced understanding of the pathway(s), components, functions, assessments, and problems of interoception and will help us to detect its disturbances and evaluate its impact on psychiatric disorders, leading to a better perspective and management. This will also advance interoception-related research.