Research on mental illness in relation to social problems such as crime, unemployment, and homelessness often ignores the broader social context in which mental illness is embedded. Policy, research, and practice will be improved if greater attention is given to social context. The authors critically analyze the approach used in much of the psychiatric services literature to infer links between mental illness and social problems. They compare these studies with studies that have been more validly conceptualized to account for social context. With this broader perspective, the impact of mental illness on crime, unemployment, and homelessness appears to be much smaller than that implied by much of the psychiatric services literature. Poverty moderates the relationship between serious mental illness and social problems. Factors related to poverty include lack of education, problems with employment, substance abuse, and a low likelihood of prosocial attachments. This relationship is often complicated and is not amenable to simple explanations. Research and policy that take this complexity into account may lead to greater effectiveness in interventions for persons with serious mental illness.