Overdiagnosis or misdiagnosis of schizophrenia among African American clients is a longstanding and critical disparity in mental health services. Overdiagnosis of schizophrenia is detrimental because it increases the potential for treatment with the wrong medications. Inadequate assessment of mood disorders, co-occurring substance abuse, and client characteristics are three factors believed to be associated with the overdiagnosis of schizophrenia. This article examines the relationships among demographic characteristics, co-occurring substance abuse, and admission diagnoses of schizophrenia and mood disorder for clients admitted to state psychiatric hospitals in Indiana. Data were obtained from the state management information system for a sample of 2,404 clients. The sample comprised white clients (80.5 percent) and African American clients (19.5 percent). All but a few of the clients were involuntarily hospitalized, and more than half of them had a diagnosis of schizophrenia. African American clients were less frequently diagnosed with bipolar and major depressive disorders and more frequently diagnosed with schizophrenia than were white clients. After controlling for the influence of other demographic variables, client race was the strongest predictor of admission diagnoses of schizophrenia. Implications for social work practice in the field of mental health and mental health services research are discussed.