ObjectivesThis study aimed to evaluate the mediational role of change in psychosocial abilities, adjustment and participation on change in motor and cognitive function from admission to discharge from a staged community-based brain injury rehabilitation (SCBIR) service in Western Australia, 2011–2020.MethodsA retrospective cohort study ofn= 324 adults with ABI enrolled in SCBIR using routinely collected rehabilitation outcome measures data. Motor and cognitive function were assessed with the UK Functional Independence and Assessment Measure and psychosocial function with the Mayo-Portland Adaptability Inventory-4. Six multilevel mediation regression analyses were conducted to determine whether change in psychosocial function (abilities, adjustment and participation) mediated change in motor and cognitive function from admission to discharge.ResultsParticipants demonstrated clinically significant improvements in both motor (+ 11.8,p< 0.001) and cognitive (+ 9.5,p< 0.001) functioning from admission to discharge. Statistically significant improvements in psychosocial abilities (− 4.8,p< 0.001), adjustment (− 2.9,p= 0.001) and participation (− 2.5,p< 0.001) were also seen but were not clinically significant. Mediation analyses showed that participation accounted for 81% of improvements in motor function at discharge and 71% of cognitive function improvements. Adjustment accounted for 26% and 32% of change in motor and cognitive function, respectively. Abilities accounted for 60% of change in cognitive function but did not significantly influence change in motor function. Changes in psychosocial participation fully mediated change in motor function during neurorehabilitation.ConclusionsPsychosocial function, particularly participation, is an important driver of motor and cognitive recovery throughout neurorehabilitation. Functional rehabilitation programs should target psychosocial improvement as an important mechanism of change.Supplementary InformationThe online version contains supplementary material available at 10.1007/s10072-023-06645-8.