Most mental disorders are associated with impairments in social functioning. Paradigms developed to study social functioning in laboratory settings mostly put participants in a detached observer point of view. However, some phenomena are inherently interactive and studying full-blown reciprocal interactions may be indispensable to understand social deficits in psychopathology. We conducted a narrative review on recent developments in the field of experimental clinical psychology and clinical social neuroscience that employs a second-person approach to studying social impairments in Autism Spectrum Disorder (ASD), Personality Disorder, Social Anxiety Disorder (SAD), and Schizophrenia. Recent developments in methodological, analytical, and technical approaches, such as dual eye-tracking, mobile eye-tracking, live video-feed, hyperscanning, or motion capture allow for a more ecologically valid assessment of social functioning. In individuals with ASD, these methods revealed reduced sensitivity to the presence of a real interaction partner as well as diminished behavioral and neural synchronicity with interaction partners. Initial evidence suggests that interactive paradigms might be a powerful tool to reveal reduced interpersonal sensitivity in Personality Disorders and increased interpersonal sensitivity in individuals with SAD. A shift towards adapting a second-person account has clearly benefitted research on social interaction in psychopathology. Several studies showed profound differences in behavioral and neural measures during actual social interactions, as compared to engaging participants as mere observers. While research using truly interactive paradigms is still in its infancy, it holds great potential for clinical research on social interaction. We review studies adopting a second-person account of social interaction in clinical psychology. Studies show profound differences between actual social interactions and mere observations. The full extent of impairments in social functioning unfolds only in complex social interactions. New methodological developments hold great potential for research on social interaction deficits. We review studies adopting a second-person account of social interaction in clinical psychology. Studies show profound differences between actual social interactions and mere observations. The full extent of impairments in social functioning unfolds only in complex social interactions. New methodological developments hold great potential for research on social interaction deficits.