The overarching aim of this proposal is to compare the efficacy of Prolonged Exposure for posttraumatic stress disorder (PTSD) plus treatment as usual (PE+TAU) relative to treatment as usual (TAU) alone using a randomized, between groups, repeated measures design. One hundred fifty six (156) ethnically/racially diverse male and female Veterans with posttraumatic stress disorder (PTSD) and severe mental illness (SMI) will be recruited from the Charleston VA and affiliated Community Based Outpatient Clinics (CBOCs) during the study time frame. For the investigators' study purposes, severe mental illness (SMI) is defined as (1) the presence of a past year Diagnostic Statistical Manual (DSM-IV) Axis I diagnosis of schizophrenia, schizoaffective disorder, bipolar disorder, or severe depression (2) resulting in persistent impairment in self-care, work, or social functioning. Veterans will be randomized 1:1 to one of two conditions: PE+TAU or TAU. The active intervention phase is 12 weeks. Veterans randomized to treatment as usual (TAU) will receive support services through the VA potentially inclusive of case management, psychotropic medication management, and/or supportive counseling and Veterans randomized to prolonged exposure (PE) plus treatment as usual (TAU) will receive 12 weekly sessions of prolonged exposure (PE) in addition to treatment as usual (TAU). All participants will be assessed at baseline, 6 weeks, post-treatment, and at 3 and 6 months. Additionally, they will complete two self report forms during sessions 3, 6, and 9.