This study compared cognitive functioning and symptomatology of unemployed, supported employed, and independently employed clients with severe mental illness. Unemployed clients who wanted to work (N = 21) were compared with clients working in supported employment programs (N = 17) and clients who had been working independently for at least 1 year (N = 23) on a neuropsychological battery and the Positive and Negative Syndrome Scale. Clients who were unemployed had more severe symptoms and worse cognitive functioning on both positive and negative symptoms, and almost all domains of cognitive functioning. Supported employed clients had more severe psychotic symptoms and worse working memory than independently employed clients, but did not differ in negative symptoms or the other domains of cognitive functioning, including attention/concentration, psychomotor speed, verbal learning and memory, or executive functions. Finally, job complexity was correlated with impaired executive functions among clients working independently, but not in supported employment. Severe symptoms and cognitive impairment may interfere with the ability of some clients with severe mental illness to obtain competitive work. Supported employment programs appear to work by helping clients compensate for problematic symptoms and cognitive impairment and, to a lesser extent, by finding or developing environmental niches in which these impairments do not impede their ability to perform the necessary job tasks.