This article explores the theoretical and practical considerations of developing cooperative communities to reduce the stigma of mental disorders and achieve meaningful structural and systemic change. A cooperative community is conceptualized as an alliance of people from differing backgrounds who work together to achieve a positive social change desired by all members of the community but not necessarily for the material benefit of all. In defining the social psychological processes involved in the development of a cooperative community—comprising (1) people with mental disorders, (2) members of the broader public, and (3) health professionals—we reconcile the evidence of disparate psychological theories of stigma and prejudice reduction, intergroup relations, identity formation and social change to show that techniques drawn from each of those theories are required to create positive change and effectively address the stigma of mental disorders. We then explore practical considerations for developing cooperative communities in the mental health sector and consider future directions for health and public policy in this area.