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OBJECTIVE To characterize variability in daily life functioning among individuals with serious mental illness based on a naturalistic performance measure of grocery shopping and standard neuropsychological tasks using cluster analytic methods. METHODS A naturalistic performance measure, the Test of Grocery Shopping Skills (TOGSS), and standard neuropsychological tasks, were completed by 191 participants with serious mental illness. Hierarchical cluster analytic techniques were used to explore functional subgroups based on naturalistic performance measure variables. Multivariate analyses of variance were utilized to compare subgroups on TOGSS variables and neuropsychological measures, respectively. RESULTS Two distinct functional subgroups emerged from the cluster analysis. On average, participants in cluster one were faster, more efficient, and more accurate compared to cluster two. Based on performance on neuropsychological tasks, cluster one had better verbal memory, visual attention, and processing speed, and executive functioning scores, compared to cluster two. The clusters did not differ on a measure of auditory working memory. CONCLUSIONS AND IMPLICATIONS FOR PRACTICE Naturalistic performance measures can assist with characterizing the heterogeneity in real life functioning among people with serious mental illness. Further work to illuminate the relationship between specific cognitive abilities and specific functional abilities is warranted and may assist with targeting effective treatment plans for functional recovery. (PsycInfo Database Record (c) 2021 APA, all rights reserved).