Changes in psychosocial functioning during out-patient treatment among 73 adolescent male and 100 female subjects, aged 12 to 19 years, were studied. The mean number of total treatment sessions was 15 sessions among the severely impaired and 14 sessions among the moderately impaired patients. The level of psychosocial functioning improved among the severely impaired (Global Assessment Scale (GAS) at treatment entry 3.9 vs. 4.7 at the last session, 95% CI, -1.085 to -0.577) and the moderately impaired patients (GAS 5.5 vs. 6.0, 95% CI, -0.682 to -0.355). The improvement was highly dependent on the psychiatric diagnosis. The level of psychosocial impairment improved in about two-thirds of subjects with adjustment and non-comorbid mood disorders, in about one-third of those with non-comorbid personality disorders, and in about a quarter of those with disruptive disorders. Careful diagnostic evaluation and assessment of psychosocial functioning are essential elements in the development of adolescent psychiatric services.