We investigated under- and over-recognition of functional limitations related to mental disorders by insurance physicians (IPs) in disability benefit claimants with and without mental disorders. The sample consisted of 247 persons claiming disability after two years of sickness absence. All respondents were interviewed using the Composite International Diagnostic Interview (CIDI) generating mental disorders listed in the Diagnostic and Statistical Manual of Mental Disorders, 4th edition (DSM-IV) present in the past thirty days. Functional limitations related to mental disorders as reported by IPs were extracted from registry. Under-recognition of functional limitations related to mental disorders for any mental disorder was found in 15.7%, for mood disorders in 7.1% and for anxiety disorders in 16.4%. Over-recognition of functional limitations related to mental disorders for any mental disorder was found in 41.2%, for mood disorders in 48.4% and for anxiety disorders in 44.8%. Under-recognition of functional limitations related to mental disorders is limited. Apparently IPs primarily focus on functional limitations and impairments, and not on the causal illness. Over-recognition of functional limitations related to mental disorders is more pronounced.