Background: Excess mortality in individuals with severe mental illness (SMI) is often explained by physical comorbidity and suboptimal healthcare. Cancer is a prevalent cause of death, and tumour stage at diagnosis is a strong predictor of mortality. We aimed to study cancer incidence, disease stage at diagnosis and subsequent mortality in individuals with SMI compared to individuals without SMI. Methods: The entire Danish population was followed in 1978–2013 using nationwide registries. Cancer incidence and subsequent mortality stratified by disease stage were compared in individuals with and without SMI. Cox regression was used to estimate incidence rate ratios (IRR) and mortality rate ratios (MRR). Cancer was examined overall and grouped by major aetiological factors. Results: The overall cancer incidence rate was lower in males with SMI than in males without SMI; IRR = 0.89 (95% CI: 0.85–0.94), but rates were similar in females with SMI and without SMI; IRR = 1.03 (95% CI: 0.99–1.07). The overall mortality rate was higher in individuals with SMI than those without; MRR = 1.56 (95% CI: 1.48–1.64) for males and MRR = 1.49 (95% CI: 1.43–1.56) for females. Incidence rates and mortality rates showed similar estimates when stratified by tumour stage and aetiology. Conclusions: We found lower cancer incidence in males with SMI compared to males without SMI and similar incidence in the two groups of women. Higher subsequent mortality was found in both sexes with SMI. The excess mortality was not explained by more advanced stages of cancer; future studies should evaluate the effect of cancer treatment and rehabilitation.