Severe mental illness (SMI) drastically affects various areas of life. People living with SMI report general impairment in their functioning and poor quality of life. The aim of this study is to describe the prevalence of disability and quality of life in a cohort of Chinese people living with SMI. This was a cross-sectional study. Assessment scales included the World Health Organization (WHO) Disability Assessment Schedule-II, the WHO Quality of Life-BREF version, and the Positive and Negative Syndrome Scale. A total of 158 subjects participated in this study, who were mainly suffering from schizophrenia or related disorders (n = 73, 46.2 %). The prevalence of self-reported disability was as high as 69.6 % (n = 110). Subjects perceived higher levels of disability in the aspects of social participation, getting along with people and dealing with life activities. Overall, the total disability scores were significantly correlated with patients’ QOL and symptom severity (all P values <0.001). Older age was a significant risk factor for disability (OR 1.425, 95 % CI 1.016–1.999). Shorter duration of current hospitalization was a significant protecting factor for disability (OR 0.704, 95 % CI 0.508–0.974). This study found the prevalence of disability among Chinese people living with SMI was high. When the disability was more severe, it was significantly correlated with greater symptom severity and poorer quality of life. Statistically significant predictors of disability included older age and longer duration of current hospitalization. Future psychiatric rehabilitation intervention studies should be conducted to reduce the impact of disability on quality of life and other health outcomes for people living with SMI. © 2015, Springer India Pvt. Ltd.