The parental fitness of psychiatrically diagnosed individuals is often questioned in termination of parental rights cases. The goal of this article is to shift the focus from a predisposing bias of unfitness to a functional-contextual analysis of parenting behavior and competency. Three underlying biased assumptions are relevant for the courts' decision making: (a) that a diagnosis (past or present) predicts inadequate parenting and child risk, (b) that a diagnosis predicts unamenability to parenting interventions, and (c) that a diagnosis means the parent is forever unfit. Each assumption will be considered in light of empirical evidence, with major depression, schizophrenia, substance abuse, and mental retardation provided as examples of diagnostic labels often assumed to render a parent unfit. A research agenda to improve clinicians' ability to assess parental fitness and understanding of how parental mental illness, mental retardation, or substance abuse might compromise parenting capacities is discussed for forensic purposes.