BACKGROUND: There are no community services for the majority of the estimated 10 million persons with schizophrenia in India. Community-based rehabilitation (CBR) is a model of care which has been widely used for physical disabilities in resource-poor settings. AIMS: To compare CBR with out-patient care (OPC) for schizophrenia in a resource-poor setting in India. METHOD: A longitudinal study of outcome in patients with chronic schizophrenia contrasted CBR with OPC. Outcome measures were assessed using the Positive and Negative Symptom Scale and the modified WHO Disability Assessment Schedule at 12 months. RESULTS: Altogether, 207 participants entered the study, 127 in the CBR group and 80 in the OPC group. Among the 117 fully compliant participants the CBR model was more effective in reducing disability, especially in men. Within the CBR group, compliant participants had significantly better outcomes compared with partially compliant or non-complaint participants (P<0.001). Although the subjects in the CBR group were more socially disadvantaged, they had significantly better retention in treatment. CONCLUSIONS: The CBR model is a feasible model of care for chronic schizophrenia in resource-poor settings.