According to the Social Identity Model of Identity Change, maintaining social identities and support over time is good for health and well-being, particularly during stressful transitions. However, in this study we explore the circumstances under which maintaining social identities – such as ‘substance user’ – may be harmful to health, and when a successful transition constitutes identity change, rather than maintenance. This prospective study examined social identities of 132 adults entering a drug and alcohol therapeutic community (TC) at admission, three fortnightly intervals and exit, as well as a representative subsample of 60 participants at follow-up. Repeated measures ANOVA results showed that user identity decreased significantly over time, such that 76% of the sample decreased in user identity strength over the first month in the TC. At the same time, recovery identity ratings increased significantly over time, with 64% of the sample staying the same or increasing their recovery identity ratings over the first month. Identity change, indexed by the change in the difference score between user identity and recovery identity over the treatment period, accounted for 34% of the variance in drinking quantity, 41% of the variance in drinking frequency, 5% of the variance in other drug use frequency, and 49% of the variance in life satisfaction at follow-up, after accounting for initial substance abuse severity and social identity ratings at entry to the TC. The findings indicate that moving from a substance using identity towards a recovery identity constitutes an important step in substance abuse treatment.