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Objectives: To evaluate the differences between two cohorts of patients with severe mental illness (schizophrenia-spectrum or bipolar disorder) and co-occurring substance-use disorders, living in either predominantly rural areas or urban areas., Methods: Two study groups of patients with a dual diagnosis, recruited using the same criteria, were evaluated, including 225 patients from New Hampshire and 166 patients from two cities in Connecticut. The two study groups were compared on demographic characteristics, housing, legal problems, psychiatric and substance use diagnoses, substance use and abuse, psychiatric symptoms, and quality of life., Results: Patients in the Connecticut study group had higher rates of cocaine-use disorder, more involvement in the criminal justice system, more homelessness, and were more likely to be from minority backgrounds. The Connecticut group also had a higher proportion of patients with schizophrenia and more severe symptoms, as well as lower rates of marriage, educational attainment, and work than the New Hampshire study group. Alcohol-use disorder was higher in the New Hampshire group. Subsequent analyses within the Connecticut group indicated that although African American patients had higher rates of cocaine-use disorder than white patients, cocaine disorder and not minority status was most strongly related to criminal involvement and homelessness., Conclusions: Because of the substances abused and the greater degree of psychiatric illness severity, patients with a dual diagnosis who are living in urban areas may require greater ancillary services, such as residential programs, Assertive Community Treatment, and jail diversion programs in order to treat their disorders successfully.