Building on modified labeling theory, I examine the relationships between stigma, psychological well-being, and life satisfaction among persons with mental illness. The study uses longitudinal data from 610 individuals in self-help groups and outpatient treatment. Results from cross-sectional and lagged regression models show adverse effects of stigma on the outcomes considered. However, much of the effects of anticipated rejection are due to discriminatory experiences. The results also indicate that stigma is related to depressive-anxiety types of symptoms but not psychotic symptoms. Although the findings show that the negative effect of stigma on life satisfaction is partly mediated by self-concept, reciprocal effects models indicate that the relationship between self-concept and life satisfaction is bi-directional. The study suggests ways in which stigma processes need to be explored in greater detail.