Objective: A significant proportion of patients with severe mental illness also experience substance use disorder. For these dual diagnosis (DD) patients, treatment is more complicated and prognosis is worse. Despite the introduction of the Community Rehabilitation of Persons With Mental Health Disability Law in 2000 and ongoing national mental health reforms, psychiatric services in Israel are not meeting the needs of an increasing number of DD patients. This study examines, for the first time in Israel, the prevalence of DD and patterns of psychiatric hospitalizations of chronic psychotic disorder patients with and without substance use disorder. Methods: The National Psychiatric Case Registry provided data on 18,684 persons with schizophrenia/schizoaffective disorders, aged 18–65, with a psychiatric hospitalization during the period 1963–2016 (with at least one hospitalization in 2010–15). Patients were considered as having DD if their substance use disorder was indicated in at least two, or 20%, of hospitalizations. Regression modeling predicted hospitalization measures (number of hospitalizations, total days hospitalized, length of stay). Results were also analyzed by legal status of admission (voluntary or involuntary; psychiatrist-ordered and court-ordered). Results: One-third of patients with chronic psychotic disorder met DD criteria, with a threefold higher rate among males (37.1%) than females (12.8%). Particularly high rates of DD (nearly 50%) were noted among male immigrants from Ethiopia. Compared with non–substance use disorder patients, DD patients had a significantly younger mean age at first hospitalization and shorter average length of stay per hospitalization but a greater number of hospitalizations and total hospital days (p < .0001 for all comparisons). The associations between DD status and hospitalization characteristics remained significant even after accounting for the effects of confounding factors. Hospitalization characteristics were also associated significantly with sex, population group, age, age at first hospitalization, and country of origin. The rate of court-ordered observation or hospitalization was threefold higher in the DD group. Conclusions: These findings, which broadly align with other countries, reflect a scarcity of outpatient services for DD patients with schizophrenia/schizoaffective disorder and substance use disorder. To achieve long-term mental health improvements, an expansion of community-based integrative treatment and rehabilitation services is needed in Israel.