Three hundred and twenty-six consecutively admitted patients with functional psychotic illnesses to which no diagnostic classification had been applied were followed up after 2.5 years. They were examined in social, clinical and psychological terms and the CATEGO programme and DSM-III criteria were applied to data concerning the index episode to derive diagnostic classifications. The deterioration in occupational functioning and the hospital careers of patients with diagnostic classifications of schizophrenia were worse than those in the other groups and positive and negative features were also more severe in patients with a classification of schizophrenia. By contrast, no differences in psychological test performance were found between the groups based upon diagnostic classification. Impaired psychological test performance was found and it was strongly related to concurrent mental state abnormalities, particularly negative symptoms. It is concluded that the diagnostic classifications used were of limited value in predicting outcome in functional psychosis.