Mental health disability imposes an enormous cost to patients, families, and society. Across free market countries, the rate of mental health disability is growing and now constitutes about one third of all disability claimants. Living on disability benefits begets demoralization and passivity. This article reviews (a) the current status of mental health disability and mental health disability systems, (b) the encouraging findings related to research on evidence-based treatments and supported employment, and (c) policy changes that might ameliorate the problem of rising rates (and costs) of mental health disability. Mental health treatments, employment services, and disability policies powerfully shape the disability experience. Evidence-based mental health and employment services can ameliorate disability and could potentially prevent disability if applied as early interventions. Yet evidence-based mental health treatments and supported employment services are rarely available. Furthermore, current disability policies tend to trap people in a “disability benefits culture.” Policy changes should recognize that people with mental health disabilities usually want to work, that they are often able to work when provided with appropriate mental health and vocational services, and that employment is highly therapeutic. Disability policies need to strengthen work incentives for beneficiaries, providers, and employers.