The drug appears to stop patients dwelling on themselves and their own perceived inadequacies.
However, a bid by British scientists to carry out trials of psilocybin on patients in order to assess its full medical potential has been blocked by red tape relating to Britain's strict drugs laws.
Professor David Nutt, professor of neuropsychopharmacology at Imperial College London, said that because magic mushrooms are rated as a class-A drug, their active chemical ingredient cannot be manufactured unless a special licence is granted.
"We haven't started the study because finding companies that could manufacture the drug and who are prepared to go through the regulatory hoops to get the licence is proving very difficult," Nutt said.
"The whole field is so bedevilled by primitive old-fashioned attitudes. Even if you have a good idea, you may never get it into the clinic, it seems," he added.
Research by Nutt has found that psilocybin switches off part of the brain called the anterior cingulate cortex.
It was known that this area is overactive in individuals suffering from depression.
In his tests on healthy individuals, it was found that psilocybin had a profound effect on making these volunteers feel happier weeks after they had taken the drug, Nutt said.