This article addresses the issues of recognition and labelling of psychological disorders (PDs) by general practitioners (GPs), and the association of recognition with management and outcome. Nearly 2000 attenders of 25 GPs were screened with the GHQ and a stratified sample of 296 patients was examined twice, using the Present State Examination (PSE) and Groningen Social Disability Schedule (GSDS). Prevalence rates of PDs according to the GHQ, GP and PSE were 46%, 26% and 15% respectively. For the 1450 'new' patients, i.e. patients who had no PD diagnosed by their GP in the 12 months prior to the enrollment visit, these rates were 38%, 14%, and 10%. GPs missed half of the PSE cases and typically assigned non-specific diagnoses to recognized cases. Depressions were more readily recognized than anxiety disorders, and the detection rates for severe disorders were higher than those for less severe disorders. Recognition was strongly associated with management and outcome. Recognized as compared to non-recognized cases were more likely to receive mental health interventions from their GP and had better outcomes in terms of both psychopathology and social functioning. Initial severity, psychological reasons for encounter, recency of onset, diagnostic category, and psychiatric comorbidity were related to both better recognition and outcome. However, these variables could not account for the association of recognition with management and outcome, but some did modify the association. A causal model of the relationships is presented and possible reasons for non-recognition and for the beneficial effects of recognition are discussed.