The advent of Large Language Models (LLMs) offers potential solutions to address problems such as shortage of medical resources and low diagnostic consistency in psychiatric clinical practice. Despite this potential, a robust and comprehensive benchmarking framework to assess the efficacy of LLMs in authentic psychiatric clinical environments is absent. This has impeded the advancement of specialized LLMs tailored to psychiatric applications. In response to this gap, by incorporating clinical demands in psychiatry and clinical data, we proposed a benchmarking system, PsychBench, to evaluate the practical performance of LLMs in psychiatric clinical settings. We conducted a comprehensive quantitative evaluation of 16 LLMs using PsychBench, and investigated the impact of prompt design, chain-of-thought reasoning, input text length, and domain-specific knowledge fine-tuning on model performance. Through detailed error analysis, we identified strengths and potential limitations of the existing models and suggested directions for improvement. Subsequently, a clinical reader study involving 60 psychiatrists of varying seniority was conducted to further explore the practical benefits of existing LLMs as supportive tools for psychiatrists of varying seniority. Through the quantitative and reader evaluation, we show that while existing models demonstrate significant potential, they are not yet adequate as decision-making tools in psychiatric clinical practice. The reader study further indicates that, as an auxiliary tool, LLM could provide particularly notable support for junior psychiatrists, effectively enhancing their work efficiency and overall clinical quality. To promote research in this area, we will make the dataset and evaluation framework publicly available, with the hope of advancing the application of LLMs in psychiatric clinical settings.