One hundred patients admitted consecutively to a state psychiatric hospital were tested to determine their literacy skills in both word recognition and reading comprehension. In addition, the readability of literature intended to inform patients about various aspects of their hospitalization was evaluated to determine if a significant discrepancy existed between literacy demands on patients and their literacy skills. Results showed that the majority of the patients were functionally illiterate in reading comprehension skills but literate in their ability to recognize or pronounce words. Educational background correlated with the ability to pronounce words, but was not predictive of reading comprehension skills. Hospital documents demanded reading comprehension skills far in excess of the literacy skills of most patients. Procedures for minimizing this discrepancy are discussed.