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Trauma exposure leads to various psychiatric disorders including depression, anxiety, bipolar disorders, personality disorders, psychotic disorders, and trauma related disorders, especially posttraumatic stress disorder (PTSD). There are some overlapping symptoms of both PTSD and psychosis that make diagnosis challenging. Despite this overlap, the evidence of PTSD with comorbid psychosis as a distinct entity lies in the research showing biologic, genetic and treatment management differences between psychotic PTSD, non-psychotic PTSD, psychotic disorders and healthy controls. There is emerging evidence that PTSD with secondary psychotic features (PTSD-SP) might be a discrete entity of PTSD with known risk factors that increase its prevalence. This review has presented evidence for individuals with PTSD-SP being distinct in genetics and neurobiological factors. Individuals with PTSD and comorbid psychosis can benefit from evidence based psychotherapy (EBT). There is not enough evidence to recommend second generation antipsychotics (SGA) for PTSD-SP given that risperidone and quetiapine are the only SGAs studied in randomized controlled trials. Hence, developing an operational diagnostic criteria and treatment framework for clinical and research use is critical.