Gaining entry to homeless services typically requires individuals to self‐identify as homeless, however, this label may be at odds with how individuals see themselves. Furthermore, because of the considerable stigma attached to homelessness, individuals’ self‐categorization has potentially important implications for their well‐being and for whether they engage with homeless services in order to obtain housing and psychosocial outcomes. We examined this question qualitatively and quantitatively with an Australian sample of 114 residents of homeless accommodation centers. Results showed that self‐categorization as “homeless” was accepted by 55% of respondents and rejected by 31%. Fourteen percent of participants expressed ambivalence about self‐categorizing as homeless. Respondents who rejected the “homeless” label reported greater personal well‐being and lower negative mood symptoms than people who accepted the label, independent of the duration of their homelessness. Self‐categorization was not, however, related to service use. We conclude that an understanding of how individuals self‐categorize and negotiate externally imposed labels is an important factor in explaining their well‐being while in homeless accommodation services. Implications for public policy and service providers are discussed.