 Social cognition has become an important treatment target for people with schizophrenia since it has been found to be a strong predictor of functional outcome. Social Cognition and Interaction Training SCIT is a manualized, group-based intervention that was developed to address the three core deficits in social cognition associated with severe mental illness: emotion perception, Theory of Mind ToM, and attributional style. SCIT has demonstrated efficacy in improving social cognition and social functioning in both inpatient and outpatient samples. In addition, evidence also shows that the therapeutic alliance is related to various treatment outcomes. Thus, both the SCIT and a therapeutic alliance focused therapy TAFT may both affect social cognition and social function, but through different pathways. TAFT was chosen, as comparison to the SCIT, in order to control for interpersonal relationship variables. In this way, the proposed study will evaluate empirically whether the specific techniques for ameliorating the social cognition of persons with severe mental illness that make-up the SCIT enhance social functioning beyond what is achieved through the effective interpersonal ingredients of the therapeutic alliance. Study purpose: 1 Assess the effectiveness of the SCIT and TAFT interventions, 2 Assess the processes that putatively contribute to the SCIT and TAFT outcomes. Method: A Randomized Controlled Trial RCT with one hundred and fifty persons with severe mental illness will be carried out in different psychiatric rehabilitation units and clinics in Israel. To assess the relative effectiveness of the SCIT and TAFT interventions with persons with severe mental illness, both interventions will be compared to treatment as usual TAU. Clinicians will be trained in both interventions, and outcome measures, including social quality of life and social functioning, as well as mediating processes, including the identification of affective states, ToM, attribution errors and therapeutic alliance, will be assessed. Cognitive functioning and symptom severity will be treated as covariates. Statistical analyses will include analysis of variance which takes into consideration attrition, effect size, mediation processes and covariates. 