A recent study showed that among U.S. military personnel, mental disorders were the leading medical correlate of separation from military service. The reasons for this association have not been determined. The purpose of this study was to characterize the risk and reasons for service separation for soldiers hospitalized with mental disorders compared with those hospitalized for other illnesses. Population-based electronic health care data were linked with data on separations and disability. The authors constructed a cohort of 13,971 U.S. Army soldiers first hospitalized in 1998 and followed them for up to 2 years following this first hospitalization. The rate of service separation 6 months after first hospitalization was 45% among personnel whose primary hospital discharge diagnosis was a mental disorder, 27% among those with a secondary mental disorder discharge diagnosis, and 11% among those hospitalized for all other medical conditions. Separation from military service due to medical disability, misconduct and other legal problems, unauthorized work absences, behavior related to personality disorders, and alcohol rehabilitation failure was significantly more common following hospitalization for a mental disorder than for other medical conditions. Mental disorders were also significantly associated with medical separations in which there was evidence that the condition existed prior to service. In the military, the occupational impact of mental disorders compared with other medical conditions appears to be mediated not only by greater disease chronicity and severity but also by a variety of behavioral problems including misconduct, legal problems, unauthorized absences, and alcohol/drug-related problems. The study also points to the difficulties inherent in screening for mental disorders prior to entry into military service.