Objective: To examine the hypothesis that the “natural” combination of delusions and hallucinations in psychotic disorders in fact represents a selection of early subclinical hallucinatory experiences associated with delusional ideation, resulting in need for care and mental health service use. Methods: In the Early Developmental Stages of Psychopathology study, a prospective, 10-year follow-up of a representative cohort of adolescents and young adults in Munich, Germany (n = 2524), clinical psychologists assessed hallucinations and delusions at 2 time points (T2 and T3). Analyses compared differences in psychopathology, familial liability for nonpsychotic disorder, nongenetic risk factors, persistence, and clinical outcome between groups characterized by: (1) absence of positive psychotic symptoms, (2) presence of isolated hallucinations, (3) isolated delusions, and (4) both hallucinations and delusions. Results: Delusions and hallucinations occurred together much more often (T2: 3.1%; T3: 2.0%) than predicted by chance (T2: 1.0%; T3: 0.4%; OR = 11.0; 95% CI: 8.1, 15.1). Content of delusions was contingent on presence of hallucinations but modality of hallucinations was not contingent on presence of delusions. The group with both hallucinations and delusions, compared to groups with either delusions or hallucinations in isolation, displayed the strongest associations with familial affective liability and nongenetic risk factors, as well as with persistence of psychotic symptoms, comorbidity with negative symptoms, affective psychopathology, and clinical need. Conclusions: The early stages of psychosis may involve hallucinatory experiences that, if complicated by delusional ideation under the influence of environmental risks and (liability for) affective dysregulation, give rise to a poor prognosis hallucinatory–delusional syndrome.