Abstract Background Community-based rehabilitation (CBR), or community-based inclusive development, is an approach to address the complex health, social and economic needs of people with schizophrenia in low and middle-income countries. Formative work was undertaken previously to design a culturally appropriate CBR intervention for people with schizophrenia in Ethiopia. The current study explored the acceptability and feasibility of CBR in practice, as well as how CBR may improve functioning among people with schizophrenia. Methods This mixed methods pilot study took place in rural Ethiopia between December 2014 and December 2015. Ten people with schizophrenia who were unresponsive to treatment with medication alone, and their caregivers, participated in CBR. CBR was led by lay workers with five weeks training and involved home visits (education, family intervention and support returning to work) and community mobilisation. Theory of change was used to guide the pilot evaluation. Qualitative and quantitative data were collected at baseline, six months and 12 months. Forty in-depth interviews and two focus group discussions were conducted with 31 individuals comprising people with schizophrenia, caregivers, CBR workers, supervisors, health officers and community members. Results The RISE CBR intervention may have a positive impact on functioning through the pathways of enhanced family support, improved access to health care, increased income and improved self-esteem. CBR was acceptable to CBR workers, community leaders and health officers. Some CBR workers found it challenging to accept the choices of people with schizophrenia. These concerns were felt to be resolvable with supplementary training for CBR workers. The intervention was feasible but further evaluation is needed on a larger scale. Conclusion In low and middle-income countries, CBR may be an acceptable and feasible adjuvant approach to facility-based care for people with schizophrenia. However, contextual factors, including poverty and inaccessible anti-psychotic medication, remain substantial challenges. There were indications that CBR can impact on functioning but the RISE trial will determine effectiveness.