Differential diagnosis includes ruling out other causes such as drug-induced conditions, dementia, infections, metabolic disorders, and endocrine disorders. Other psychiatric disorders must then be ruled out. In delusional disorder, mood symptoms tend to be brief or absent, and unlike schizophrenia, delusions are non-bizarre and hallucinations are minimal or absent.

Interviews are important tools to obtain information about the patient's life situation and past history to help make a diagnosis. Clinicians generally review earlier medical records to gather a full history. Clinicians also try to interview the patient's immediate family, as this can be helpful in determining the presence of delusions. The mental status examination is used to assess the patient's current mental condition.

A psychological questionnaire used in the diagnosis of the delusional disorder is the Peters Delusion Inventory (PDI) which focuses on identifying and understanding delusional thinking. However, this questionnaire is more likely used in research than in clinical practice.

In terms of diagnosing a non-bizarre delusion as a delusion, ample support should be provided through fact checking. In case of non-bizarre delusions, Psych Central notes, "All of these situations could be true or possible, but the person suffering from this disorder knows them not to be (e.g., through fact-checking, third-person confirmation, etc.)."

The modern definition and Jaspers' original criteria have been criticised, as counter-examples can be shown for every defining feature.

Studies on psychiatric patients show that delusions vary in intensity and conviction over time, which suggests that certainty and incorrigibility are not necessary components of a delusional belief.

Delusions do not necessarily have to be false or 'incorrect inferences about external reality'. Some religious or spiritual beliefs by their nature may not be falsifiable, and hence cannot be described as false or incorrect, no matter whether the person holding these beliefs was diagnosed as delusional or not.

In other situations the delusion may turn out to be true belief. For example, in delusional jealousy, where a person believes that their partner is being unfaithful (and may even follow them into the bathroom believing them to be seeing their lover even during the briefest of partings), it may actually be true that the partner is having sexual relations with another person. In this case, the delusion does not cease to be a delusion because the content later turns out to be verified as true or the partner actually chose to engage in the behavior of which they were being accused.

In other cases, the delusion may be assumed to be false by a doctor or psychiatrist assessing the belief, because it "seems" to be unlikely, bizarre or held with excessive conviction. Psychiatrists rarely have the time or resources to check the validity of a person’s claims leading to some true beliefs to be erroneously classified as delusional. This is known as the Martha Mitchell effect, after the wife of the attorney general who alleged that illegal activity was taking place in the White House. At the time, her claims were thought to be signs of mental illness, and only after the Watergate scandal broke was she proved right (and hence sane).

Similar factors have led to criticisms of Jaspers' definition of true delusions as being ultimately 'un-understandable'. Critics (such as R. D. Laing) have argued that this leads to the diagnosis of delusions being based on the subjective understanding of a particular psychiatrist, who may not have access to all the information that might make a belief otherwise interpretable. R. D. Laing's hypothesis has been applied to some forms of projective therapy to "fix" a delusional system so that it cannot be altered by the patient. Psychiatric researchers at Yale University, Ohio State University and the Community Mental Health Center of Middle Georgia have used novels and motion picture films as the focus. Texts, plots and cinematography are discussed and the delusions approached tangentially. This use of fiction to decrease the malleability of a delusion was employed in a joint project by science-fiction author Philip Jose Farmer and Yale psychiatrist A. James Giannini. They wrote the novel "Red Orc's Rage", which, recursively, deals with delusional adolescents who are treated with a form of projective therapy. In this novel's fictional setting other novels written by Farmer are discussed and the characters are symbolically integrated into the delusions of fictional patients. This particular novel was then applied to real-life clinical settings.

Another difficulty with the diagnosis of delusions is that almost all of these features can be found in "normal" beliefs. Many religious beliefs hold exactly the same features, yet are not universally considered delusional. These factors have led the psychiatrist Anthony David to note that "there is no acceptable (rather than accepted) definition of a delusion." In practice, psychiatrists tend to diagnose a belief as delusional if it is either patently bizarre, causing significant distress, or excessively pre-occupying the patient, especially if the person is subsequently unswayed in belief by counter-evidence or reasonable arguments.

It is important to distinguish true delusions from other symptoms such as anxiety, fear, or paranoia. To diagnose delusions a mental state examination may be used. This test includes appearance, mood, affect, behavior, rate and continuity of speech, evidence of hallucinations or abnormal beliefs, thought content, orientation to time, place and person, attention and concentration, insight and judgment, as well as short-term memory.

Johnson-Laird suggests that delusions may be viewed as the natural consequence of failure to distinguish conceptual relevance. That is, the person takes irrelevant information and puts it in the form of disconnected experiences, then it is taken to be relevant in a manner that suggests false causal connections. Furthermore, the person takes the relevant information, in the form of counterexamples, and ignores it.

Some critical psychiatrists criticize the practice of defining one and the same belief as normal in one culture and pathological in another culture for cultural essentialism. They argue that since cultural influences are mixed, including not only parents and teachers but also peers, friends, books and the internet, and the same cultural influence can have different effects depending on earlier cultural influences, the assumption that culture can be boiled down to a few traceable, distinguishable and statistically quantifiable factors and that everything that does not fall in those factors must be biological, is not a justified assumption. Other critical psychiatrists argue that just because a person's belief is unshaken by one influence does not prove that it would remain unshaken by another. For example, a person whose beliefs are not changed by verbal correction from a psychiatrist, which is how delusion is usually diagnosed, may still change his or her mind when observing empirical evidence, only that psychiatry rarely if ever present patients with such situations.

Medications for schizophrenia are often used, especially when positive symptoms are present. Both first-generation antipsychotics and second-generation antipsychotics may be useful. Cognitive behavioral therapy has also been used.

Because of reduced levels of trust, there can be challenges in treating PPD. However, psychotherapy, antidepressants, antipsychotics and anti-anxiety medications can play a role when an individual is receptive to intervention.

According to the DSM-5 (Diagnostic and Statistical Manual of Mental Disorders, 5th Edition), Cotard delusion falls under the category of somatic delusions, those that involve bodily functions or sensations. (Citation needed. DSM-5 does not specifically reference Cotard syndrome.)

There are no further diagnostic criteria for Cotard syndrome within the DSM-5, and identification of the syndrome relies heavily on clinical interpretation.

Cotard delusion should not be confused with Delusional Disorders as defined by the DSM-5, which involve a different spectrum of symptoms that are less severe and have lesser detrimental effect on functioning.

A 2012 paper suggested that, when compared with experiences today, psychiatric conditions associated with psychotic spectrum symptoms may be possible explanations for some revelatory driven experiences and activities such as those of Abraham, Moses, Jesus, and Saint Paul. However, the paper admits that the study was not aimed to deny supernatural elements, nor was it conclusive on whether their experiences were delusional in part or not at all.

A challenge in the treatment of delusional disorders is that most patients have limited insight, and do not acknowledge that there is a problem. Most patients are treated as out-patients, although hospitalization may be required in some cases if there is a risk of harm to self or others. Individual psychotherapy is recommended rather than group psychotherapy, as patients are often quite suspicious and sensitive. Antipsychotics are not well tested in delusional disorder, but they do not seem to work very well, and often have no effect on the core delusional belief. Antipsychotics may be more useful in managing agitation that can accompany delusional disorder. Until further evidence is found, it seems reasonable to offer treatments which have efficacy in other psychotic disorders.

Psychotherapy for patients with delusional disorder can include cognitive therapy which is conducted with the use of empathy. During the process, the therapist can ask hypothetical questions in a form of therapeutic Socratic questioning. This therapy has been mostly studied in patients with the persecutory type. The combination of pharmacotherapy with cognitive therapy integrates treating the possible underlying biological problems and decreasing the symptoms with psychotherapy as well. Psychotherapy has been said to be the most useful form of treatment because of the trust formed in a patient and therapist relationship.

Supportive therapy has also been shown to be helpful. Its goal is to facilitate treatment adherence and provide education about the illness and its treatment.

Furthermore, providing social skills training has helped many persons. It can promote interpersonal competence as well as confidence and comfort when interacting with those individuals perceived as a threat.

Insight-oriented therapy is rarely indicated or contraindicated; yet there are reports of successful treatment. Its goals are to develop therapeutic alliance, containment of projected feelings of hatred, impotence, and badness; measured interpretation as well as the development of a sense of creative doubt in the internal perception of the world. The latter requires empathy with the patient's defensive position.

Examples from a 295-subject study in Lithuania showed that the most common religious delusions were being a saint (in women) and being God (in men).

In one study of 193 people who had previously been admitted to hospital and subsequently diagnosed with schizophrenia, 24% were found to have religious delusions.

A 1999 study identified that religious delusions were often present or expressed in persons with forensic committal to a psychiatric unit.

Psychosis is first and foremost a diagnosis of exclusion. So a new-onset episode of psychosis "cannot" be considered a symptom of a psychiatric disorder until other relevant and known causes of psychosis are properly excluded, or ruled out. Many clinicians improperly perform, or entirely miss this step, introducing avoidable diagnostic error and misdiagnosis.

An initial assessment includes a comprehensive history and physical examination by a physician, psychiatrist, psychiatric nurse practitioner or psychiatric physician assistant. Biological tests should be performed to exclude psychosis associated with or caused by substance use, medication, toxins, surgical complications, or other medical illnesses.

Delirium should be ruled out, which can be distinguished by visual hallucinations, acute onset and fluctuating level of consciousness, indicating other underlying factors, including medical illnesses. Excluding medical illnesses associated with psychosis is performed by using blood tests to measure:

- Thyroid-stimulating hormone to exclude hypo- or hyperthyroidism,

- Basic electrolytes and serum calcium to rule out a metabolic disturbance,

- Full blood count including ESR to rule out a systemic infection or chronic disease, and

- Serology to exclude syphilis or HIV infection.

Other investigations include:

- EEG to exclude epilepsy, and an

- MRI or CT scan of the head to exclude brain lesions.

Because psychosis may be precipitated or exacerbated by common classes of medications, medication-induced psychosis should be ruled out, particularly for first-episode psychosis. Both substance- and medication-induced psychosis can be excluded to a high level of certainty, using a

- Urinalysis and a

- Full serum toxicology screening.

Because some dietary supplements may also induce psychosis or mania, but cannot be ruled out with laboratory tests, a psychotic individual's family, partner, or friends should be asked whether the patient is currently taking any dietary supplements.

Common mistakes made when diagnosing people who are psychotic include:

- Not properly excluding delirium,

- Not appreciating medical abnormalities (e.g., vital signs),

- Not obtaining a medical history and family history,

- Indiscriminate screening without an organizing framework,

- Missing a toxic psychosis by not screening for substances "and" medications

- Not asking family or others about dietary supplements,

- Premature diagnostic closure, and

- Not revisiting or questioning the initial diagnostic impression of primary psychiatric disorder.

Only after relevant and known causes of psychosis are excluded, a mental health clinician may make a psychiatric differential diagnosis using a person's family history, incorporating information from the person with psychosis, and information from family, friends, or significant others.

Types of psychosis in psychiatric disorders may be established by formal rating scales. The Brief Psychiatric Rating Scale (BPRS) assesses the level of 18 symptom constructs of psychosis such as hostility, suspicion, hallucination, and grandiosity. It is based on the clinician's interview with the patient and observations of the patient's behavior over the previous 2–3 days. The patient's family can also answer questions on the behavior report. During the initial assessment and the follow-up, both positive and negative symptoms of psychosis can be assessed using the 30 item Positive and Negative Symptom Scale (PANSS).

Research efforts are focusing on prevention in identifying early signs from relatives with associated disorders similar with schizophrenia and those with prenatal and birth complications. Prevention has been an ongoing challenge because early signs of the disorder are similar to those of other disorders. Also, some of the schizophrenic related symptoms are often found in children without schizophrenia or any other diagnosable disorder.

When the focus is to remedy some injustice by legal action, they are sometimes called "querulous paranoia".

In cases where reporters of stalking behavior have been judged to be making false reports, a majority of them were judged to be delusional.

A popular symptom of paranoia is the attribution bias. These individuals typically have a biased perception of reality, often exhibiting more hostile beliefs. A paranoid person may view someone else's accidental behavior as though it is with intent or threatening.

An investigation of a non-clinical paranoid population found that feeling powerless and depressed, isolating oneself, and relinquishing activities are characteristics that could be associated with those exhibiting more frequent paranoia.

Some scientists have created different subtypes for the various symptoms of paranoia including erotic, persecutory, litigious, and exalted.

Due to the suspicious and troublesome personality traits of paranoia, it is unlikely that someone with paranoia will thrive in interpersonal relationships. Most commonly paranoid individuals tend to be of a single status. According to some research there is a hierarchy for paranoia. The least common types of paranoia at the very top of the hierarchy would be those involving more serious threats. Social anxiety is at the bottom of this hierarchy as the most frequently exhibited level of paranoia.

Paranoia is an instinct or thought process believed to be heavily influenced by anxiety or fear, often to the point of delusion and irrationality. Paranoid thinking typically includes persecutory, or beliefs of concerning a perceived threat towards oneself (e.g. ""Everyone is out to get me"", which is an American parochial phrase). Paranoia is distinct from phobias, which also involve irrational fear, but usually no blame. Making false accusations and the general distrust of others also frequently accompany paranoia. For example, an incident most people would view as an accident or coincidence, a paranoid person might believe was intentional. Paranoia is a central symptom of psychosis. It is also a matter of personal tolerance for the individual that might be in conflict with psychiatric diagnoses.

Ideas of reference and delusions of reference describe the phenomenon of an individual's experiencing innocuous events or mere coincidences and believing they have strong personal significance. It is "the notion that everything one perceives in the world relates to one's own destiny".

In psychiatry, delusions of reference form part of the diagnostic criteria for psychotic illnesses such as schizophrenia, delusional disorder, bipolar disorder (during the elevated stages of mania), as well as schizotypal personality disorder. To a lesser extent, it can be a hallmark of paranoid personality disorder. Such symptoms can also be caused by intoxication, especially with hallucinogens or stimulants like methamphetamine.

Studies suggest that the prevalence of paraphrenia in the elderly population is around 2-4%.

In patients suffering from schizophrenia, grandiose and religious delusions are found to be the least susceptible to cognitive behavioral interventions. Cognitive behavioral intervention is a form of psychological therapy, initially used for depression, but currently used for a variety of different mental disorders, in hope of providing relief from distress and disability. During therapy, grandiose delusions were linked to patients' underlying beliefs by using inference chaining. Some examples of interventions performed to improve the patient's state were focus on specific themes, clarification of neologisms, and thought linkage. During thought linkage, the patient is asked repeatedly by the therapist to explain his/her jumps in thought from one subject to a completely different one.

Patients suffering from mental disorders that experience grandiose delusions have been found to have a lower risk of having suicidal thoughts and attempts.

While paraphrenia can occur in both men and women, it is more common in women, even after the difference has been adjusted for life expectancies. The ratio of women with paraphrenia to men with paraphrenia is anywhere from 3:1 to 45:2

The article "Cotard's syndrome: A Review" (2010) reports successful pharmacological treatments (mono-therapeutic and multi-therapeutic) using antidepressant, antipsychotic, and mood stabilizing drugs; likewise, with the depressed patient, electroconvulsive therapy (ECT) is more effective than pharmacotherapy. Cotard syndrome resulting from an adverse drug reaction to valacyclovir is attributed to elevated serum concentration of one of valacyclovir's metabolites, 9-carboxymethoxymethylguanine (CMMG). Successful treatment warrants cessation of the drug, valacyclovir. Hemodialysis was associated with timely clearance of CMMG and resolution of symptoms.

According to the Mayo Clinic, it is best to start receiving treatment for paranoid schizophrenia as early as possible and to maintain the treatment throughout life. Continuing treatment will help keep the serious symptoms under control and allow the person to lead a more fulfilling life. This illness is typically unpreventable.

It has a strong hereditary component with a first degree parent or sibling. There is some possibility that there are environmental influences including "prenatal exposure to a viral infection, low oxygen levels during birth (from prolonged labor or premature birth), exposure to a virus during infancy, early parental loss or separation, and verbal, physical or sexual abuse in childhood". Eliminating any of these factors could help reduce an individual's future risk of developing paranoid schizophrenia.

Paranoid schizophrenia is an illness that typically requires lifelong treatment with neuroleptics to allow someone to have a relatively stable and normal lifestyle. In order to be successfully treated, a person with schizophrenia should seek help from family or primary care doctors, psychiatrists, psychotherapists, pharmacists, family members, case workers, psychiatric nurses, or social workers, provided he or she is not unable to do so, due to many people with schizophrenia having the inability to accept their condition. Non-compliance with neuroleptics may also occur if the patient considers the side effects (such as extrapyramidal symptoms) to be more debilitating than the condition itself. The main options that are offered for the treatment of paranoid schizophrenia are the following: neuroleptics, psychotherapy, hospitalization, electroconvulsive therapy, and vocational skills training.

There are many different types of disorders that have similar symptoms to paranoid schizophrenia. There are tests that psychiatrists perform to achieve a correct diagnosis. They include "psychiatric evaluation, in which the doctor or psychiatrist will ask a series of questions about the patient's symptoms, psychiatric history, and family history of mental health problems; medical history and exam, in which the doctor will ask about one's personal and family health history and will also perform a complete physical examination to check for medical issues that could be causing or contributing to the problem; laboratory tests in which the doctor will order simple blood and urine tests can rule out other medical causes of symptoms".

There are side effects associated with antipsychotic medication. Neuroleptics can cause high blood pressure and high cholesterol. Many people who take them exhibit weight gain and have a higher risk of developing diabetes.

Grandiose delusions (GD), delusions of grandeur, expansive delusions also known as megalomania are a subtype of delusion that occur in patients suffering from a wide range of psychiatric diseases, including two-thirds of patients in manic state of bipolar disorder, half of those with schizophrenia, patients with the grandiose subtype of delusional disorder, and a substantial portion of those with substance abuse disorders. GDs are characterized by fantastical beliefs that one is famous, omnipotent, wealthy, or otherwise very powerful. The delusions are generally fantastic and typically have a religious, science fictional, or supernatural theme. There is a relative lack of research into GD, in contrast to persecutory delusions and auditory hallucinations. About 10% of healthy people experience grandiose thoughts but do not meet full criteria for a diagnosis of GD.

In 2013, the American Psychiatric Association released the fifth edition of the DSM (DSM-5). To be diagnosed with schizophrenia, two diagnostic criteria have to be met over much of the time of a period of at least one month, with a significant impact on social or occupational functioning for at least six months. The person had to be suffering from delusions, hallucinations, or disorganized speech. A second symptom could be negative symptoms, or severely disorganized or catatonic behaviour. The definition of schizophrenia remained essentially the same as that specified by the 2000 version of DSM (DSM-IV-TR), but DSM-5 makes a number of changes.

- Subtype classifications – such as catatonic and paranoid schizophrenia – are removed. These were retained in previous revisions largely for reasons of tradition, but had subsequently proved to be of little worth.

- Catatonia is no longer so strongly associated with schizophrenia.

- In describing a person's schizophrenia, it is recommended that a better distinction be made between the current state of the condition and its historical progress, to achieve a clearer overall characterization.

- Special treatment of Schneider's first-rank symptoms is no longer recommended.

- Schizoaffective disorder is better defined to demarcate it more cleanly from schizophrenia.

- An assessment covering eight domains of psychopathology – such as whether hallucination or mania is experienced – is recommended to help clinical decision-making.

The ICD-10 criteria are typically used in European countries, while the DSM criteria are used in the United States and to varying degrees around the world, and are prevailing in research studies. The ICD-10 criteria put more emphasis on Schneiderian first-rank symptoms. In practice, agreement between the two systems is high. The current proposal for the ICD-11 criteria for schizophrenia recommends adding self-disorder as a symptom.

If signs of disturbance are present for more than a month but less than six months, the diagnosis of schizophreniform disorder is applied. Psychotic symptoms lasting less than a month may be diagnosed as brief psychotic disorder, and various conditions may be classed as psychotic disorder not otherwise specified, while schizoaffective disorder is diagnosed if symptoms of mood disorder are substantially present alongside psychotic symptoms. If the psychotic symptoms are the direct physiological result of a general medical condition or a substance, then the diagnosis is one of a psychosis secondary to that condition. Schizophrenia is not diagnosed if symptoms of pervasive developmental disorder are present unless prominent delusions or hallucinations are also present.

Schizophreniform disorder is equally prevalent among men and women. The most common ages of onset are 18–24 for men and 18–35 for women. While the symptoms of schizophrenia often develop gradually over a period of years, the diagnostic criteria for schizophreniform disorder require a much more rapid onset.

Available evidence suggests variations in incidence across sociocultural settings. In the United States and other developed countries, the incidence is low, possibly fivefold less than that of schizophrenia. In developing countries, the incidence is substantially higher, especially for the subtype "With Good Prognostic Features". In some of these settings schizophreniform disorder may be as common as schizophrenia.

Schizophrenia is diagnosed based on criteria in either the American Psychiatric Association's (APA) fifth edition of the "Diagnostic and Statistical Manual of Mental Disorders" (DSM 5), or the World Health Organization's International Statistical Classification of Diseases and Related Health Problems (ICD-10). These criteria use the self-reported experiences of the person and reported abnormalities in behavior, followed by a clinical assessment by a mental health professional. Symptoms associated with schizophrenia occur along a continuum in the population and must reach a certain severity and level of impairment, before a diagnosis is made. As of 2013 there is no objective test.