In 1843, Daniel M'Naghten, an Englishman who was apparently a paranoid schizophrenic under the delusion that he was being persecuted, shot and killed Edward Drummond, Secretary to British Prime minister Sir Robert Peel. M'Naghten believed that Drummond was Peel. To the surprise of the nation, M'Naghten was found not guilty on the grounds that he was insane at the time of his act. The subsequent public outrage convinced the English House of Lords to establish standards for the defense of insanity, the result subsequently referred to as the M'Naghten Rule.

The M'Naghten Rule provides as follows: "Every man is to be presumed to be sane, and ... that to establish a defense on the ground of insanity, it must be clearly proved that, at the time of the committing of the act, the party accused was laboring under such a defect of reason, from disease of mind, and not to know the nature and quality of the act he was doing; or if he did know it, that he did not know he was doing what was wrong."

The test to determine if a defendant can distinguish right from wrong is based on the idea that the defendant must know the difference in order to be convicted of a crime. Determining a defendant's ability to do so may seem straightforward enough, but dilemmas often arise in cases in which the M'Naghten standard is used. For instance, some issues focus on whether a defendant knew that his or her criminal acts were wrong or whether he or she knew that laws exist that prohibit these acts.

Criticism of the M'Naghten test often focuses on the test's concentration on a defendant's cognitive abilities. Questions also crop up about how to treat defendants who know their acts are against the law but who cannot control their impulses to commit them. Similarly, the courts need to determine how to evaluate and assign responsibility for emotional factors and compulsion. Additionally, because of the rule's inflexible cognitive standard, it tends to be difficult for defendants to be found not guilty by reason of insanity. Despite these complications, M'Naghten has survived and is currently the rule in a majority of states with regard to the insanity defense (sometimes combined with the Irresistible Impulse Test).