Most studies on coping among persons with severe mental illness have relied on retrospective self-report methods; a limitation of this methodology is susceptibility to recall bias. The purpose of the present investigation was to expand the current understanding of the impact of coping among persons with severe mental illness by examining coping strategies, mood, and social functioning (operationalized as productive time use) using a daily process design. Twenty-seven adults diagnosed with severe mental illness completed baseline clinical interviews and up to 20 days of nightly telephone interviews addressing coping and daily life. A total of 198 coping efforts were reported for 387 days. Mixed-effects regression analyses examined the association between type of daily coping strategy (problem-centered, neutral, or avoidant) and both daily proportion of time participants spent in productive activity and daily negative mood, controlling for demographic and clinical variables. The results indicated that productive time use was significantly lower on days when avoidant strategies were used, in contrast with days when problem-centered strategies and neutral strategies were used. There was no significant main effect of coping on negative mood, although there was a trend in the expected direction. Findings support the hypothesis that the types of coping strategies adults with severe mental illness use are related to better social functioning on a daily level.