Forty‐seven psychiatric inpatients with concurrent RDC‐diagnosed schizophrenia and psychoactive substance use disorders were randomly assigned to one of two outpatient treatment programs: 1) integrated psychiatric and substance abuse treatment; or 2) non‐integrated treatment. Patients abused cocaine, alcohol, and marijuana, with over two‐thirds using all three drugs. At 4 months, 16 of 23 patients (69.6%) in integrated treatment remained in treatment vs. 9 of 24 (3 7.5%) in the nonintegrated treatment. Rehospitalization did not differ between groups, but treatment nonstarters had significantly more days in the hospital than those who began treatment. At 8 months, addiction and psychiatric severity decreased significantly for patients remaining in treatment. Engagement in integrated outpatient treatment may decrease rehospitalization, and lessen psychiatric and substance abuse s