One hundred schizophrenic patients, newly discharged from a state mental hospital, were randomly assigned to group or to individual psychotherapy. The patients in each treatment category were initially equivalent on measures of illness severity and on prognostic indices. Outcome after 12 and 24 months of treatment, based on social effectiveness and psychiatric ratings, was significantly better for group therapy, but rehospitalization rates did not differ significantly. Analysis of therapist variables failed to account for the differences in outcome. Thus, in this population, the type of treatment was able to influence the outcome.