Stress plays a significant role in the development and relapse of psychological disorders. Although numerous forms of stressors have been identified as contributors to psychological disorders, one relatively understudied stressor is the discrimination experienced by individuals with mental illness. This study aimed to examine the association between perceived stress and discrimination within this vulnerable population. Adults from the Chicago community diagnosed with schizophrenia or schizoaffective disorder (n = 30), major depression or bipolar disorder (n = 20), and healthy controls (n = 31) were recruited. Discrimination and stress were measured using the Everyday Discrimination Scale and the Perceived Stress Scale. Results of one-way ANOVAs showed significant group differences in perceived discrimination and stress. Patients diagnosed with schizophrenia reported the highest levels of discrimination, which could not be explained by race, symptoms of paranoia, or household income. A moderate positive relationship between discrimination and stress was also observed, which was slightly stronger for females and non-white individuals. A multiple regression model revealed that diagnosis and discrimination were both significant predictors of stress, whereas race and sex were not. Understanding this connection between discrimination and stress is crucial for improving support systems and interventions for minority groups experiencing severe mental illness and discrimination.