Background. There is a well-recognized association between substance use and psychotic disorders, sometimes described as 'dual diagnosis '. The use of substances by people with psychosis has a negative impact in terms of symptoms, longitudinal course of illness and psychosocial adjustment. There are few validated treatments for such individuals, and those that do exist are usually impracticable in routine clinical settings. The present study employs a randomized controlled experimental design to examine the effectiveness of a manualized group-based intervention in helping patients with dual diagnosis reduce their substance use. Method. The active intervention consisted of weekly 90-min sessions over 6 weeks. The manualized intervention was tailored to participants' stage of change and motivations for drug use. The control condition was a single educational session. Results. Sixty-three subjects participated, of whom 58 (92%) completed a 3-month follow-up assessment of psychopathology, medication and substance use. Significant reductions in favour of the treatment condition were observed for psychopathology, chlorpromazine equivalent dose of antipsychotics, alcohol and illicit substance use, severity of dependence and hospitalization. Conclusions. It is possible to reduce substance use in individuals with psychotic disorders, using a targeted group-based approach. This has important implications for clinicians who wish to improve the long-term outcome of their patients.