The high comorbidity between substance use disorders and serious mental illnesses is a significant challenge to traditional treatment systems that have historically treated psychiatric and substance use disorders with different providers and agencies. Defining characteristics of serious mental illness include difficulty with work, performing in school or parenting, social difficulties, and problems caring for oneself. Common serious psychiatric disorders include schizophrenia, schizoaffective disorder, bipolar disorder, and severe major depression, posttraumatic stress disorder, and borderline personality disorder. The epidemiology of substance use disorders in serious mental illness is reviewed, including prevalence, correlates, and onset and course of the disorder. The clinical consequences of substance use disorders in this population are devastating for every possible aspect of the illness. Common factors may increase vulnerability to both substance abuse and psychiatric disorders. The principles of treating co-occurring disorders are based on modern integrated methods, as well as research on the effectiveness of integrated treatment.