The financial, personal, and societal costs of severe mental illness are extraordinarily high. Individuals suffering from schizophrenia occupy 25 percent of all hospital beds and account for 40 percent of all long-term care days. The rate of Supplemental Security income (SSI) and Social Security disability insurance (SSDI) beneficiaries who are disabled because of a mental disorder has increased more than 50 percent since 1986, and a total of more than 1.1 million individuals received benefits in 1991 because of their mental disorders. All of these costs have continued to rise despite the nearly ubiquitous administration of antipsychotic medication with its well-documented benefits. The most promising treatment to complement medication and produce better outcomes is psychiatric rehabilitation. It is based on the same rationale as rehabilitation for physically challenged individuals--illness produces impairments that make individuals less able to perform basic life skills that handicap them when they try to be students, workers, spouses, parents, etc. Rehabilitation teaches individuals to perform the basic skills using methods that compensate for the impairments, and modifying the environment so the new methods are successful or the skills are not required. Rehabilitation with severely mentally ill individuals is particularly challenging because of the extent of their impairments and disabilities. The impairments--flagrant symptoms that unpredictably wax, wane, and persist even with medication; reduced motivation to participate in community life; residual deficits in the most elemental cognitive processes of attention, memory, and abstraction--clearly limit individuals' abilities to perform life skills and function in major societal roles. Moreover, the challenge of successful rehabilitation is magnified by the individual-to-individual, time-to-time, and disorder-to-disorder variations in these impairments and disabilities. Given this challenge, how well does psychiatric rehabilitation work in practice? Two types of studies provide answers to this question; those that have focused exclusively on teaching skills to severely mentally ill individuals, and those that have focused on larger units of care, case management, and vocational rehabilitation, that typically include skills training as one of their services. The first type of study provides "pure" information but sacrifices, to some extent, clinical utility and immediate generality. The second provides information that can be transferred to clinical practice but sacrifices clarity about what is the effective ingredient in a set of intermingled services. The results of the first type have generally indicated, with some qualifications, that severely mentally ill individuals learn skills, use them in their own environments, and may receive other clinically meaningful benefits.(ABSTRACT TRUNCATED AT 400 WORDS)