The prevalence and course of alcohol and drug use were examined in a longitudinal, retrospective study of 100 schizophrenic outpatients. During the 18 month study period, problem substance use (abuse and dependence) was not associated with differential attrition from outpatient treatment. Thirty to forty percent of subjects were using drugs or alcohol during any evaluation period. The overall level of substance use and problem use of alcohol, marijuana, and other drugs remained stable, while problem use of cocaine and multiple substances increased over time. Problem substance use was associated with lower functional status and the detrimental effect of problem substance use appeared to increase with time. These findings underscore the need to address substance use problems in the context of outpatient schizophrenia treatment.