Psychosis and substance abuse are intimately related. Psychotic spectrum illnesses commonly co-occur with substance use disorders (SUDs), and many substances of abuse can cause or exacerbate psychotic symptoms along a temporal spectrum from acute to chronic presentations. Despite the common co-occurrence between psychotic spectrum illnesses and SUDs, they are often under-recognized and undertreated, leading to poor treatment outcomes. Accurate detection and diagnosis of individuals with psychotic illness co-occurring with addictive disorders is key to properly treat such disorders. This article will review the nature of the relationship between psychosis and substance abuse by examining prevalence rates of each disorder alone and their rates of co-occurrence, the neurobiological basis for substance abuse comorbidity in schizophrenia spectrum disorders, key and salient aspects related to accurate diagnosis along a continuum from acute to subacute to chronic conditions, and pitfalls associated with diagnostic dilemmas. A case example will be used to highlight key points related to diagnostic challenges.