Research suggests that the effectiveness of religious belief as a coping strategy may depend on whether an individual adopts a positive or negative view of the association between life events and their religious belief. Many individuals with psychiatric disabilities consider their faith an important aspect of their lives, especially in times of increased distress. As with other populations, they often rely on their religious beliefs to help them improve their daily functioning. Positive religious coping consistently predicts improved psychosocial adjustment, such as lower reports of depression, anxiety, and self-esteem, whereas negative religious coping predicts the opposite effects. It is possible that religious coping influences psychosocial adjustment through optimism, which is a strong predictor of positive psychological outcomes for those with psychiatric disabilities. We proposed a model in which optimism mediated the effect of religious coping on life satisfaction and psychological adjustment for individuals with psychiatric disabilities. We found that optimism mediated the effect of religious coping on both life satisfaction and psychological distress. Negative religious coping was associated with direct and indirect reductions in life satisfaction and increases in psychological distress. Although positive religious coping was associated with direct and indirect increases in life satisfaction, psychological distress was only indirectly reduced. These results bring attention to the ways that religious coping can improve quality of life, as well as negatively affect outcomes for those diagnosed with psychiatric disabilities.