OBJECTIVES: The main effects of pharmaceutical treatment in schizophrenia are symptom relief and relapse prevention. Antipsychotic treatment is, however, associated with adverse effects that impact patient well-being. A novel instrument, TooL (Tolerability and quality of Life), measures health-related quality of life with antipsychotic medication across eight different dimensions: mood, function capabilities, fatigue, weight gain, stiffness and tremor, physical restlessness, sexual dysfunction and nausea. This study aimed to develop a function linking responses to TooL to health utility values. METHODS: A multi-attribute utility function (MAUF) was developed based on the instrument for patients with schizophrenia, schizoaffective or bipolar syndrome on antipsychotic treatment to allow estimation of health utilities associated with antipsychotic treatments and their side effects. 220 patients with stable schizophrenia, schizoaffective disorder or bipolar disorder completed a set of ratings to facilitate the estimation of a MAUF linking each possible state in the classification system to a utility value. RESULTS: A total of 183 of the 220 patients provided complete and consistent ratings allowing an average utility function to be estimated. The TooL utility ratings correlated significantly with disease specific instruments for disease severity (MADRS and PANSS) and quality of well-being (SWN). Utility ratings were, furthermore, more sensitive to the presence of side effects than EQ-5D. CONCLUSIONS: TooL is a novel system for measuring health utilities in patients with schizophrenia, schizoaffective disorder or bipolar depression that incorporates the patient perspective of side effects of antipsychotic treatment. Adverse effects from antipsychotic treatment impact the quality-of-life and should be taken into account in economic evaluations of treatments with different side effect profiles. TooL facilitates cost-utility analyses that reflect this important aspect of treatment choice and outcome.