Mental disorders may be best represented by dimensional constructs that span traditional diagnostic boundaries. There is evidence that empirically derived dimensional phenotypes improve nosology and etiological research, but less is known about their clinical utility. We compared dimensional and categorical representations of anxiety and depression as predictors of response to psychological treatment in a large patient sample ( N = 3,760). Confirmatory factor analysis demonstrated that an internalizing factor—hypothesized to be the substrate of anxiety and depression—explained correlations among interview-based diagnoses at treatment outset. The internalizing factor had consistent, albeit sometimes modest, prospective associations with all treatment outcome measures: global clinical improvement, anxiety and depression symptoms, and need for inpatient hospitalization (standardized effect range = .13–.43). Categorical diagnoses—except major depression—did not reliably predict treatment outcome after adjusting for the higher order internalizing dimension. We conclude that reorienting clinical assessment around transdiagnostic phenotypes might enhance prognosis and other aspects of clinical decision-making.