<p>Neurodegenerative diseases (NDDs), such as Alzheimer’s disease (AD), Parkinson’s disease (PD), and Huntington’s disease (HD), are characterized by progressive neuronal loss associated with neuroinflammation, oxidative stress, and epigenetic dysregulation. Emerging evidence suggests that histone deacetylases (HDACs) are overexpressed in these conditions, making HDAC inhibitors (HDACIs) like sodium butyrate (NaB) promising candidates for therapeutic intervention. In addition, NaB has shown beneficial effects in various psychiatric disorders, including depression, anxiety, and schizophrenia, suggesting a broader neurotherapeutic potential. This review synthesizes findings from various in vitro and in vivo studies investigating the mechanisms and therapeutic applications of NaB, in both neurological and psychiatric disorders. We focus on its role as an HDACI, its impact on histone acetylation and gene expression, its ability to modulate gut microbiota, and its capacity to cross the blood–brain barrier (BBB) to exert neuroprotective effects. NaB demonstrates anti-inflammatory, antioxidant, anti-apoptotic, and neurotrophic properties, contributing to improved cognitive, motor, and behavioral outcomes in multiple models of central nervous system (CNS) dysfunction. Accumulating evidence supports its efficacy not only in NDDs but also in mental health disorders, highlighting its potential as a complementary treatment alongside conventional therapies. Given its multifaceted mechanisms and favorable safety profile, NaB holds promise as a novel therapeutic agent across a spectrum of neurological and psychiatric conditions. Further clinical investigation is warranted to fully establish its translational value.</p>