Formerly incarcerated military veterans—comprising approximately 8% of the prison population—experience significant barriers to reentry including homelessness, mental illness, and mortality. One of the most consequential barriers is relapsing into substance use. Most justice-involved veterans (JIV) possess histories of substance abuse before imprisonment, and this rate continues upon release. Mental illness—depression in particular—is often comorbid with substance abuse. With high rates of depression and substance use in a JIV population, it is important to determine to what extent release from prison contributes to predicting substance use and negative clinical outcomes. This study compares rates of substance use and negative outcomes between two matched samples of JIV and general veterans, both with depression and a substance use disorder. It is hypothesized that JIV will have a higher rate of substance use and that use will be associated with higher negative outcomes in the JIV condition. Rates of use of veterans released from prison and general veterans were collected during six-year follow-up periods. Use was defined as the use of an illicit substance or alcohol, if an alcohol use disorder was present, and determined by urine drug tests or self-report recorded in medical notes. Results indicate that JIV used substances at a higher rate compared to those not recently incarcerated, and that such use is predictive of several other negative outcomes including homelessness, use of inpatient substance treatment, and reincarceration. Structured drug treatment programs and other interventions should cater to veterans recently released from prison to offer help in these areas.