Objective To examine the effectiveness of a treatment model of psychodynamic group therapy (PGT) for combat Veterans with posttraumatic stress disorder (PTSD). Method A total of 158 male Veterans with PTSD (mean age = 30.09 years) were assigned to 15 treatment groups of 7–13 patients each. PGT was a 1‐year therapy, 1.5 hour, once‐a‐week sessions administered in the following stages: group building activities, differentiation of group members, intimacy building, and termination. Levels of PTSD and depression symptoms, functioning, and hope were assessed at pretreatment baseline, posttreatment, and 12‐month follow‐up. Results Multilevel modeling analyses indicate that our group therapy is associated with reductions in PTSD and depressive symptoms at posttreatment, and that these effects were maintained at 12‐month follow‐up. The results also showed significantly improved patients' functioning by the end of therapy and at the 12‐month follow‐up point, and that the patients’ hope level had increased. Conclusion The findings show that our model of psychodynamic group therapy is associated with mental improvements in Veterans with PTSD. However, further randomized controlled trials are recommended to establish the advantages of our therapeutic method compared to other modes of therapy.