Background: Most studies of the effects of trauma on mental health have generally not separately assessed psychosocial functioning, and in those that have key issues have received little attention, such as the relation between the time courses of the two kinds of outcome, and detailed assessment of social functioning in a range of domains. The present study made separate assessments with a view to testing four hypotheses. First, that the experience of trauma itself (independently of effects on mental health) has a negative effect on psychosocial functioning; second, that psychopathology following trauma is associated with poorer psychosocial functioning; third, that psychosocial functioning recovers when psychiatric conditions remit; fourth, that post-traumatic stress and depression have different associations with impairments of psycho-social functioning. Method: One hundred and fifteen young adults who had survived a shipping disaster (the sinking of the Jupiter in 1988) between 5 and 8 years previously, and 50 control participants were assessed for psychopathology, and for psychosocial functioning using the Adolescent to Adult Personality Functioning Assessment (ADAPFA). Results: Results did not support the first hypothesis: survivors who, although experiencing a traumatic event, did not develop Post Traumatic Stress Disorder or other psychopathology warranting diagnosis, when compared with Controls who had no psychopathology since the time of the disaster, showed no significant differences on any ADAPFA domains or on total score. There was partial support for the second hypothesis: survivors with diagnosable disorder during the rating period showed poorer psychosocial functioning in total ADAPFA score and in the domains of Education/Work, Love Relationships, and Non-specific Social Contacts, though not in other domains. The third hypothesis was supported: recovered Survivors showed no psychosocial impairments compared with unaffected Controls. Results also supported the fourth hypothesis, showing differential effects of post traumatic stress and depression in relation to the extent and kind of psycho-social impairments. Conclusions: The results lend support to the general model that effects on psychosocial functioning following traumatic experience are mediated by psychopathology, though further research is needed to establish whether the present pattern of findings applies to other kinds of trauma. © Association for Child Psychology and Psychiatry, 2004.