An accurate assessment of substance use is necessary to make a correct psychiatric diagnosis and to provide appropriate treatment. This study uses meta-analysis to establish the strength of the association between self-reported substance use and the results of laboratory substance assay including the testing for specific substances and screening for any substance use in psychiatric hospitals and in community mental health settings. A systematic search for published studies was supplemented by additional data required for meta-analysis provided by several researchers in this field. Using random-effects meta-analysis, we calculated the pooled estimate of the odds ratio of a positive substance assay in patients reporting use or non-use of substances and estimated the sensitivity, specificity, positive predictive value and negative predictive value. Twenty-six studies met the inclusion criteria. Very strong associations were found between self-reported use and positive tests for cannabis [N = 11 studies, odds ratio (OR) = 22.3; 95% confidence interval (CI) = 10.1-49.1], amphetamines (N = 8, OR = 26.6; 95% CI = 7.9-88.9), cocaine (N = 8, OR = 39.7; 95% CI = 16.2-97.2) and opiates (N = 7, OR = 83.5; 95% CI = 26.7-260.7). Strong associations were found between self-reported use of any substance and positive substance screening (N = 15, OR = 7.2, 95% CI = 3.6-14.1) and tests for alcohol use (N = 5, OR = 8.5; 95% CI = 2.5-28.4). Screening for any substance use had a sensitivity of 61% and a specificity of 66%. Testing for individual substances was specific but lacked sensitivity. Screening has the potential to detect clinically relevant substances that would not be reported by the patient, whereas testing for a specific substance has little advantage over self-report. The sensitivity of the substance assay might be improved by obtaining a sample at the earliest opportunity. Consideration should be given to the increased use of substance screening in general adult mental health settings because it could improve the accuracy of psychiatric diagnosis and increase the likelihood of patients receiving treatment for substance use disorders.