Psychedelics may have therapeutic potential for a variety of mental pathologies. Metaphysical belief theory asserts that these benefits stem from the adoption of comforting supernatural beliefs following a mystical experience. Predictive self-binding theory suggests that psychological insights are the primary cause of beneficial outcomes of psychedelic use. The present study tests these two competing models of psychedelic benefits. We conducted a quantitative content analysis on unsolicited self-reports of psychedelic users available on Erowid.org, to examine the potential relations between psychological insight, ego dissolution, therapeutic intent, altered metaphysical belief, and enduring health outcomes. Two hundred forty psychedelic experience reports were randomly selected and manually extracted from the website, coded, and analyzed. Path analysis using structural equation modeling showed that psychological insight uniquely predicted beneficial outcomes. Moreover, beneficial outcomes’ positive relation to ego dissolution and therapeutic intent was fully mediated by psychological insight. The negative relation between therapeutic intent and detrimental outcomes was also fully mediated by psychological insight. These findings support the predictive self-binding model over the metaphysical belief model and highlight the importance of psychological insight in beneficial outcomes related to psychedelic use.