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OBJECTIVE: Epidemiological studies have shown that mental disorders are associated with reduced health-related quality of life, high levels of health care utilization, and work absenteeism. However, measurement of the burden of mental disorders by using population-based methods in large working populations, such as the U.S. military, has been limited. METHOD: Analysis of hospitalizations among all active-duty military personnel (16.4 million person-years) from 1990 to 1999 and ambulatory visits from 1996 to 1999 was conducted by using the Defense Medical Surveillance System. Rates of hospitalization, ambulatory visits, and attrition from military service were compared for persons with mental disorder diagnoses and those with diagnoses in 15 other ICD-9 disease categories. RESULTS: Mental disorders was the leading category of discharge diagnoses among men and the second leading category among women; 13% of all hospitalizations and 23% of all inpatient bed days were attributed to mental disorders. Six percent of the military population received ambulatory services for mental disorders annually in 1998 and 1999. Among a 1-year cohort of personnel, 47% of those hospitalized for the first time for a mental disorder left military service within 6 months. This attrition rate was significantly different from the rate of only 12% after hospitalization for any of the 15 other disease categories (range=11%–18%) (relative risk=4.04, 95% confidence interval=3.91–4.17). The difference remained significant after controlling for effects of age, gender, and duration of service. CONCLUSIONS: Mental disorders appear to represent the most important source of medical and occupational morbidity among active-duty U.S. military personnel. These findings provide new population-based evidence that mental disorders are common, disabling, and costly to society.