COVID-19 has catastrophically affected the world’s panoramic view of human well-being in terms of healthcare and management. With the increase in the number of cases worldwide, neurological symptoms and psychological illnesses from COVID-19 have increasingly upsurged. Mental health illness and affective disorders, including depression, obsessive-compulsive disorder, anxiety, phobia, and panic disorders, are highly impacted due to social distress. The COVID-19 pandemic not only affected people with pre-existing mental and affective illnesses, but also healthy individuals with anxiety, worrying, and panic symptoms, and fear conditioning. In addditon, the novel coronavirus is known to impact the central nervous system in the brain, resulting in severe and certain long-lasting neurological issues. Owing to the significance of neurological and psychological events, the present perspective has been an attempt to disseminate the impact of COVID-19 on neural injury through inflammation, and its interrelation with psychological symptoms. In this current review, we synthesize the literature to highlight the critical associations between SARS-CoV-2 infection and the nervous system, and mental health illness, and discuss potential mechanisms of neural injury through psycho-neuroimmunity.