Schizophrenia and bipolar disorder are leading causes of morbidity across all populations, with heritability estimates of approximately 80% indicating a substantial genetic component. Population genetics and genome-wide association studies suggest an overlap of genetic risk factors between these illnesses but it is unclear how this genetic component is divided between common gene polymorphisms, rare genomic copy number variants, and rare gene sequence mutations. We report evidence that the lipid transporter gene ABCA13 is a susceptibility factor for both schizophrenia and bipolar disorder. After the initial discovery of its disruption by a chromosome abnormality in a person with schizophrenia, we resequenced ABCA13 exons in 100 cases with schizophrenia and 100 controls. Multiple rare coding variants were identified including one nonsense and nine missense mutations and compound heterozygosity/homozygosity in six cases. Variants were genotyped in additional schizophrenia, bipolar, depression (n > 1600), and control (n > 950) cohorts and the frequency of all rare variants combined was greater than controls in schizophrenia (OR = 1.93, p = 0.0057) and bipolar disorder (OR = 2.71, p = 0.00007). The population attributable risk of these mutations was 2.2% for schizophrenia and 4.0% for bipolar disorder. In a study of 21 families of mutation carriers, we genotyped affected and unaffected relatives and found significant linkage (LOD = 4.3) of rare variants with a phenotype including schizophrenia, bipolar disorder, and major depression. These data identify a candidate gene, highlight the genetic overlap between schizophrenia, bipolar disorder, and depression, and suggest that rare coding variants may contribute significantly to risk of these disorders.