Psychologists increasingly have the opportunity to work with persons with serious and chronic mental illnesses. Managed care encourages services that rely less on hospital treatment and more on a combination of brief and intensive outpatient therapy and long-term, low-cost maintenance and support. Diagnostic practices needed to be effective in such an environment include categorical and functional assessment. Psychological treatments that have been demonstrated effective include cognitive-behavioral social skills training, pragmatic supportive therapy, personal therapy, the multimodal functional model, therapeutic contracting, case management, and multiple family therapy. These innovative assessment and treatment techniques are described along with some experimental treatments of cognitive dysfunction.In the past, many psychologists believed that they had little to offer individuals suffering from serious mental disorders, such as schizophrenia and chronic major depression, and considered those cases to be more suitable for psychiatric treatment that was based on pharmacology and hospital care. Psychology training generally includes little exposure to course work and practical training with seriously mentally ill individuals (Millet & Schwebel, 1994), and there are relatively few role models in the profession to encourage students to pursue this area of spe-JEFFREY R. BEDELL received his PhD in clinical psychology from the University of South Florida in 1975. He is currently an associate professor of psychiatry (psychology) at Mount Sinai School of Medicine and is the director of Community Options, .a clinical research program at Elmhurst Hospital Center developing and evaluating clinical and costeffective community treatments for persons with serious mental illness. RICHARD H. HUNTER received his PhD from Southern Illinois University at Carbondale in 1982. He is chief psychologist for the Bureau of Clinical Services, Illinois Department of Mental Health and Developmental Disabilities, and is clinical associate professor in the Department of Psychiatry at Southern Illinois University's School of Medicine. He is working on programs and intervention strategies for treatment-resistant patients and interventions for people with a dual diagnosis of mental retardation and mental illness. PATRICK W, CORRIGAN, PsyD, is an associate professor of psychiatry at the University of Chicago, where he directs the Center for Psychiatric Rehabilitation, a clinical, research, and training program for persons with serious mental illness and their families. He is also the principal investigator and director of the Illinois Staff Training Institute for Psychiatric Rehabilitation, related to the implementation and maintenance of effective rehabilitation programs in real world settings.