Objective: The first aim of this study was to assess the proportion of patients who achieved reliable and clinically significant change over the course of treatment in an inpatient psychosocial rehabilitation program. The second aim was to determine whether age, gender, length of stay, and diagnosis and co-morbid diagnosis predicted those who were classified as improved or not improved, using clinical significance criteria. Method: Three hundred and thirty-seven patients from inpatient units at Bloomfield Hospital, Orange, New South Wales, Australia were assessed at admission, 3-month reviews and discharge using the expanded Brief Psychiatric Rating Scale, the Health of the Nation Outcome Scales and the Kessler 10. Results: Reliable and clinically significant improvement was found for 32.4% of inpatients on psychiatric symptomatology, 19.5% on psychosocial functioning and 20.2% on psychological distress. Logistic regression analyses found that the predictor variables collectively predicted those who made reliable and clinically significant improvement on psychiatric symptomatology, but not on psychosocial functioning or psychological distress. Those with a primary diagnosis of schizoaffective disorder had higher rates of improvement in psychiatric symptomatology compared to those with a diagnosis of schizophrenia. Those with co-morbid substance abuse disorders showed a trend towards greater improvement. Conclusions: Inpatient treatment is associated with clinically significant improvements for some patients with a severe mental illness. Patients with schizo-affective disorders are proportionally more likely to make improvement.