The recovery model has been enormously influential in shaping mental health services globally over the last two decades. However, empirical research on its outcomes and psychological mechanisms is sparse. This community-based case study utilised both semi-structured qualitative interviews and quantitative survey methods to investigate perceptions of recovery, identity, and wellbeing among people with chronic and severe mental illness attending recovery-oriented support groups. Consistent with a social identity approach and the recovery model, to the extent that people identified as “in recovery”, they reported better recovery outcomes (e.g., sense of purpose) and reduced psychological distress. Furthermore, recovery identity more strongly predicted recovery outcomes than it did psychological distress. Both the quantitative and qualitative data pointed to collective efficacy (i.e., group-based empowerment) as a key mediator of these outcomes. These findings are consistent with the recovery model and speak to the utility of a social identity approach for conceptualizing its efficacy. However, these findings also speak to the need for further evaluation of how and when recovery-oriented mental health services achieve their intended goal of improving quality of life for people with chronic and severe mental illness.