BackgroundDespite a growing body of evidence supporting the efficacy of psychosocial rehabilitation for individuals with severe mental illness (SMI), a large proportion of these individuals remain unable to maintain basic social roles such as employee, parent, or spouse. This study investigated whether changes in role functioning over time impact symptom severity indirectly through the mechanism of changes in self-esteem as posited by Modified Labeling theory. MethodsThe study sample was composed of 148 individuals diagnosed with schizophrenia, schizoaffective disorder, bipolar disorder with psychotic features, and major depression with psychotic features who elected to participate in community-based psychosocial rehabilitation services. Measures of role functioning, self-esteem, and psychiatric symptoms were gathered at baseline and six months through a combination of structured clinical interviews and self-report surveys. ResultsSEM results at baseline provided support for a model in which self-esteem fully mediated the relationship between role functioning and psychiatric symptoms. The final model explained 20% of the variance in psychiatric symptoms. Analyses at six months post-baseline (time 2) indicate that changes in self-esteem fully mediated the relationship between changes in role functioning and changes in psychiatric symptoms. The final change model explained 23% of the variance in changes in psychiatric symptoms. ConclusionResults provide empirical support for the principles underlying Modified Labeling theory. Implications include the need for interventions that focus on social participation as a means of improving self-esteem, thereby decreasing symptom exacerbation and future relapse for people with SMI.