Objectives: To establish whether the four-dimensional Assessment of Quality of Life (AQoL-4D) produces robust utility values in adults with psychotic illness, and identify health inequalities compared with the general population. Methods: The AQoL-4D was completed by 1613 individuals with an International Classification of Diseases, Tenth Revision, psychotic illness in the 2010 Australian National Survey of Psychosis. Utilities were assessed for this sample and 20 subgroups, and were compared with general population norms. Modified Cohen d was used as an index of effect size. Utilities were collapsed into 10 health-related quality-of-life (HRQOL) bands or decades. Results: HRQOL in people with psychotic illness was half of the maximum achievable utility (half-“full health”) with a mean utility of 0.49 (95% confidence interval [CI] 0.48–0.51), and showing substantial variability across subgroups. Participants with essentially normal functioning had the highest mean utility (0.72; 95% CI 0.68–0.77), and those with very poor perceived mental health had the lowest (0.22; 95% CI 0.18–0.26). These subgroups showed the most variability. Negative symptoms also gave rise to substantial variation. Among diagnostic categories, only depressive psychosis had a large effect relative to delusional disorders. The distribution of utilities in people with psychotic illness differed markedly from that in the general population, with 6.8% versus 47.2% having values in the highest decade (>0.90–1.00). Utilities were lower in every age group in people with psychosis. Conclusions: Profound HRQOL impacts are revealed by the AQoL-4D in people with psychotic illness, and marked variations in utilities were observed for key subjective and objective measures. We provide a suite of utility values for economic modeling studies and recommend the AQoL-4D for assessing HRQOL in people with psychotic illness.