The authors determined the prevalence of mental illness in 382 people representative of the occupants of shelters for the homeless and cheap single-room accommodations in inner-city areas of Melbourne. Clinicians were trained to use a standardized diagnostic instrument, the Structured Clinical Interview for DSM-III-R, to diagnose a range of severe mental disorders, including psychotic, affective, and substance-related disorders. Almost half the people interviewed received diagnoses of current disorders, and over 70% received lifetime diagnoses. There was considerable comorbidity. Many factors are likely to contribute to the concentration of people with mental disorders in such homeless and disaffiliated groups.