Learning from errors is fundamental to adaptive human behavior. It requires detecting errors, evaluating what went wrong, and adjusting behavior accordingly. These dynamic adjustments are at the heart of behavioral flexibility and accumulating evidence suggests that deficient error processing contributes to maladaptively rigid and repetitive behavior in a range of neuropsychiatric disorders. Neuroimaging and electrophysiological studies reveal highly reliable neural markers of error processing. In this review, we evaluate the evidence that abnormalities in these neural markers can serve as sensitive endophenotypes of neuropsychiatric disorders. We describe the behavioral and neural hallmarks of error processing, their mediation by common genetic polymorphisms, and impairments in schizophrenia, obsessive-compulsive disorder, and autism spectrum disorders. We conclude that neural markers of errors meet several important criteria as endophenotypes including heritability, established neuroanatomical and neurochemical substrates, association with neuropsychiatric disorders, presence in syndromally-unaffected family members, and evidence of genetic mediation. Understanding the mechanisms of error processing deficits in neuropsychiatric disorders may provide novel neural and behavioral targets for treatment and sensitive surrogate markers of treatment response. Treating error processing deficits may improve functional outcome since error signals provide crucial information for flexible adaptation to changing environments. Given the dearth of effective interventions for cognitive deficits in neuropsychiatric disorders, this represents a potentially promising approach.