OBJECTIVE: The authors sought to determine the prevalence and effects of medical and psychiatric comorbidity on initial outcome in a group of patients experiencing a first episode of psychosis. METHOD: Patients with a first episode of psychosis who were consecutively admitted to a hospital (N = 102) were examined for the presence of psychiatric and medical disorders. Patients were given psychiatric diagnoses with the use of the Structured Clinical Interview for DSM-III-R and were rated weekly on symptom rating scales. Outcome variables at discharge were final symptom rating scale scores, length of hospitalization, and recovery on the basis of operationalized criteria. RESULTS: Comorbid diagnoses were present in 52.0% (N = 53) of the patients, and 37.7% (N = 20) had multiple comorbid diagnoses. The most common comorbid diagnosis was substance abuse. Patients with affected psychoses were significantly more likely than those with nonaffective psychoses to have a comorbid substance abuse diagnosis. Patients with psychiatric comorbidity had poorer initial outcomes, while those with medical comorbidity had fewer symptoms at discharge. CONCLUSIONS: Comorbidity is common and may be a useful predictor of the outcome of a first episode of psychosis.