The proposed pilot study will enroll a cohort of up to 30 subjects with schizophrenia or schizoaffective disorder and nicotine and alcohol dependence, who are receiving ongoing outpatient mental health treatment from community providers. Subjects will be randomly assigned to one of the two treatment groups (varenicline vs. placebo). Following a one week screening phase, participants will be seen on day 4, day 8, then weekly over an 8-week treatment period. One week supply of medication will be dispensed at each study visit, with the exception of the first week, when only 4 days supply will be given on 2 days (visit 1 and 2). One month after discontinuation of medication, a follow-up interview will be conducted.