The functional-organic distinction aims to distinguish symptoms, signs, and syndromes that can be explained by diagnosable biological changes, from those that cannot. The distinction is central to clinical practice and is a key organising principle in diagnostic systems. Following a pragmatist approach that examines meaning through use, we examine how the functional-organic distinction is deployed and conceptualised in psychiatry and neurology. We note that the conceptual scope of the terms ‘functional’ and ‘organic’ varies considerably by context. Techniques for differentially diagnosing ‘functional’ and ‘organic’ diverge in the strength of evidence they produce as a necessary function of the syndrome in question. Clinicians do not agree on the meaning of the terms and report using them strategically. The distinction often relies on an implied model of ‘zero sum’ causality and encourages classification of syndromes into discrete ‘functional’ and ‘organic’ versions. Although this clearly applies in some instances, this is often in contrast to our best scientific understanding of neuropsychiatric disorders as arising from a dynamic interaction between personal, social and neuropathological factors. We also note ‘functional’ and ‘organic’ have loaded social meanings, creating the potential for social disempowerment. Given this, we argue for a better understanding of how strategic simplification and complex scientific reality limit each other in neuropsychiatric thinking. We also note that the contribution of people who experience the interaction between ‘functional’ and ‘organic’ factors has rarely informed the validity of this distinction and the dilemmas arising from it, and we highlight this as a research priority.