The present study examined the relationships between how research participants experienced their neighborhood, their neighborhood social climate, and psychological well-being. Participants (n = 525) were residents of supported housing programs who used mental health services at one of 17 community mental health centers in South Carolina. Hierarchical regression and mediation analyses were employed to answer research questions. Results suggest that neighbor relations, perceptions of neighborhood safety, and neighborhood satisfaction were significantly associated with perceptions of neighborhood social climate; and neighborhood social climate accounted for a significant amount of the variance in psychiatric distress. Of particular interest, perceptions of neighborhood social climate fully mediated the relationship between the specific reported neighborhood experiences and psychiatric distress. These findings have implications for interventions and policy aimed at promoting integration of individuals with serious mental illness into community settings.