Although studies show that loneliness increases risk of illness and hastens death, it is poorly understood among persons with severe mental illness (SMI). Using data on 150 people with SMI, we used logistic regression to predict (1) loneliness from sociodemographic and clinical characteristics, and (2) psychiatric hospitalization from presence of loneliness. We also examined mediating effects. Study participants who were most willing to ask for help were 70% less likely (odds ratio [OR], 0.30; confidence interval [CI], 0.09–0.99; p < 0.05) to be lonely than those who were least willing, and participants with high levels of internalized stigma were 9.25 times as likely (CI, 9.25; OR, 2.29–37.32; p < 0.01) as other participants to be lonely. Participants who were most lonely were 2.69 times (CI, 1.03–7.04, p < 0.05) as likely to be placed in psychiatric hospitals as those who were less lonely. Loneliness mediates the association between internalized stigma and psychiatric hospitalization (OR, 1.30; CI, 1.04–1.73). Findings can be used to help prevent inpatient stay.