The authors examined the psychosocial correlates of 1) having a history of any type of psychiatric treatment and 2) being staff‐identified as a suitable candidate for treatment from an outpatient dual‐diagnosis program. They reviewed 1,303 consecutive patients in a 16‐month period who applied for substance abuse and/or dual‐diagnosis treatment at a Veterans Administration hospital. The sample included 665 individuals describing a history of prior psychiatric treatment, 126 of whom were referred for outpatient dual‐diagnosis treatment. Data were collected at the time of treatment application and included demographics, employment and treatment histories, and recent substance use. Even the broadest definition of dual diagnosis (having a history of any type of psychiatric treatment) was associated with higher rates of homelessness, disconnection from social support systems, unemployment and vocational disability, and treatment chronicity; a narrower definition selected for even greater impairment. Substance abuse programs should anticipate significant case management needs in addition to psychiatric support when treatment programs are expanded to include services to patients with comorbid psychiatri