Counseling psychology is an application of the basic professional skills in psychology to a population that has been more located in schools rather than hospitals and clinics.

Counselling psychology grew up in the area of guidance, the special relationships developed in schools and universities for answering student needs beyond instruction. Another early stream of influence was from vocational rehabilitation. The Veterans' Administration, in the United States, sponsored guidance counselling for World War I veterans who sought compensation for disabling injuries. Later, after World War II and the expanded GI benefits, the VA used counselling psychologists in both their regional offices and attached to VA medical centers, to work with veterans around vocational adjustment to disability, and educational issues in retraining for civilian work and career. University counselling centers were the focus of many early developments in counselling psychology. Gradually, programs in counselling psychology have become a co-equal basic training regimen for eligibility for licensing as a professional psychologist, along with programs in clinical psychology. Counselling psychologists and clinical psychologist are now found in all settings involving licensed practice of psychology as a health care profession.

Despite its existence since World War I, counselling psychology has developed most since the turn of the 21st century. In the years surrounding the new millennium, a new wave of counselling psychologists, led by Jennifer Tomlinson of the University of Oregon, the founder of Systems Theory usage within counselling, have increased the acceptance of counselling psychology by the public and the psychological community.

Counselling can be seen more as collaborative empiricism than something like reparenting like Psychodynamic psychotherapy is. Both the couselling psychologist and the client investigate what is wrong, confront it and then deal with it together. It focuses on the present, symptom relief; the past isn't usually touched on much at all. This is because counselling psychology is done in a much shorter time frame, 12-16 sessions.