The meaning of the terms "validity" and "utility" as they apply to psychiatric diagnoses is examined. The authors discuss the concepts of validity, utility, and disease; review assumptions that have been made about mental disorders as disease entities; and examine the evidence that mental disorders are separated from one another and from normality by natural boundaries (zones of rarity). Despite historical and recent assumptions to the contrary, there is little evidence that most currently recognized mental disorders are separated by natural boundaries. Researchers are increasingly assuming that variation in symptoms is continuous and are therefore questioning the validity of contemporary classifications. It is important to distinguish between validity and utility in considering psychiatric diagnoses. Diagnostic categories defined by their syndromes should be regarded as valid only if they have been shown to be discrete entities with natural boundaries that separate them from other disorders. Although most diagnostic concepts have not been shown to be valid in this sense, many possess high utility by virtue of the information about outcome, treatment response, and etiology that they convey. They are therefore invaluable working concepts for clinicians.