Severe mental illness (SMI) is associated with poor daily functioning; however available interventions currently under-deliver on their recovery prospect. Mobile digital health (mHealth) interventions are increasingly being developed and evaluated, and have the potential to support recovery. This review evaluates the use of mHealth technology to assess, monitor and reduce functioning difficulties in people with SMI. Studies were systematically searched on multiple databases. Study quality was assessed and double-rated independently. Findings were organised using a narrative synthesis and results were summarised according to the mHealth device purpose, i.e., assessment and monitoring or intervention. Thirty-eight studies comprised of 2262 participants met the inclusion criteria. Smartphones were the most popular mHealth device; personal digital assistants, wearables and tablets were also used. mHealth was widely found to be acceptable and feasible, with preliminary findings suggesting it can support functional recovery by augmenting an intervention, simplifying the assessment, increasing monitoring frequency and/or providing more detailed information. Considerations for overcoming barriers to implementation, recommendations for future research to establish effectiveness, personalisation and specification of mHealth devices and methodologies are discussed. The value of mHealth for remote delivery of recovery based interventions is also considered.