David Nichols often mentions that out of the discovery of serotonin in the brain and its structural relationship to (previously discovered) LSD came the first formal hypothesis that neurochemistry was implicated in mental illness, and more importantly, behavior. This is credited to Gaddum in 1953 and 1954, and Woolley and Shaw in 1954.

In looking for these publications I found a paper that refers to "the first specific hypothesis" for schizophrenia as the discovery of the resemblance of mescaline to epinephrine, published in 1952 by Osmond and Smythies as Schizophrenia: A New Approach. Is it not more accurate to refer to the mescaline-adrenaline hypothesis as the first biochemical hypothesis for mental illness?

edit: Thanks /u/morebinding7 for clearing this up. The mescaline-adrenaline hypothesis may have been the first biochemical hypothesis for schizophrenia, but the LSD-serotonin hypothesis was the first to propose the role of brain chemistry in mental illness and behaviour.

On a related note, Franz Vollenweider often introduces his talks with a history of the Burghölzli Hospital (University Hospital of Psychiatry Zürich). The hospital was dedicated to housing and treating people with seemingly incurable mental illness. Eugen Bleuler, who was the director of the Burghölzli at the time, was the first to coin the term "schizophrenia" and described the illness. Carl Jung also spent his formative years at the University of Zurich, working as Bleuler's assistant before obtaining his Ph.D. and lecturing in psychiatry. This is also where Albert Hofmann obtained his chemistry degree. Fun fact: Sandoz, the company that patented LSD and which Hofmann and Stoll worked for, was originally a chemical dye company before it became a pharmaceudical company.

More on the origins of psychopharmacology:

The Discovery of Serotonin and its Role in Neuroscience

Serotonin and Hallucinogens

MAPS Bulletin: A Biochemical Bridge to the Embodied Psyche: LSD Research 1945-1965