BACKGROUND: Current health policy assumes better quality services lead to better outcomes. AIMS: To investigate the relationship between quality of mental health rehabilitation services in England, local deprivation, service user characteristics and clinical outcomes. METHOD: Standardised tools were used to assess the quality of mental health rehabilitation units and service users' autonomy, quality of life, experiences of care and ratings of the therapeutic milieu. Multiple level modelling investigated relationships between service quality, service user characteristics and outcomes. RESULTS: A total of 52/60 (87%) National Health Service trusts participated, comprising 133 units and 739 service users. All aspects of service quality were positively associated with service users' autonomy, experiences of care and therapeutic milieu, but there was no association with quality of life. CONCLUSIONS: Quality of care is linked to better clinical outcomes in people with complex and longer-term mental health problems. Thus, investing in quality is likely to show real clinical gains.