Given controversy about the comparative utility of inpatient and outpatient treatment for substance abusers, we compared samples of cocaine-abusing inpatients (n = 149) and outpatients (n = 149) regarding a range of clinical characteristics both at entrance into treatment and one year following this initial assessment. We wished to assess (a) whether inpatient treatment appeared justified on the basis of more severe clinical problems in this group of patients and (b) the comparative one-year outcome of patients treated in the two conditions. Regarding the presenting clinical picture, inpatients had more severe ratings in numerous areas, with heavier drug use, social impairment, and psychopathology. At one-year follow-up, the direction of clinical ratings had reversed in the two groups, with inpatients showing lower problem severity in several areas, particularly cocaine use and psychopathology. Thus, results of this nonrandomized study of inpatient and outpatient treatment suggest that decisions to hospitalize were made on a rational basis and that inpatient treatment had better long-term efficacy.