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In a tightly controlled, clinical research environment, Rychtarik et al. (2000) found that individuals with an alcohol use disorder (AUD) benefited more from inpatient (IP) than outpatient care, if they presented with high alcohol problem severity and/or low cognitive functioning. This study sought to (a) validate and extend these findings within the uncontrolled environment of a community-based treatment center and (b) test whether inpatients had fewer days of involuntary abstinence (e.g., incarcerations), controlling for differences in treatment expectancy across care settings. Clients (N = 176) with an AUD were deterministically assigned to inpatient-need group (needs IP = high severity and/or low cognitive functioning; no need for IP = neither high severity nor low cognitive functioning). Within need group, participants were randomly assigned to 21 days of routine inpatient or outpatient care, plus 6 months of continuing care. Primary outcomes of percentage of days abstinent (PDA), monthly point prevalence abstinence (PPA), and drinks per drinking day (DDD), and the secondary outcome of involuntary abstinence were assessed over 18 months. Among high-severity participants, inpatients significantly reduced DDD, and outpatients did not. Neither problem severity nor cognitive functioning moderated other setting effects. Treatment expectancy, assessed after being informed of scheduled setting, was higher among inpatients than outpatients. High-expectancy inpatients maintained the highest PDA throughout follow-up, had the highest PPA for most of follow-up, and delayed peak prevalence of involuntary abstinence by 6 months. In sum, the Alcohol Problem Severity × Setting interaction on DDD appears robust. The potential moderating role of expectancy will warrant further study.