BACKGROUND Threatening illness perceptions (IPs) have been associated with poorer health outcomes. However, to the authors' knowledge, it remains unclear whether threatening IPs that are consistent with disease severity are equally harmful. The aim of the current study was to: 1) identify subgroups of cancer survivors based on IPs and prognosis; and 2) assess the health‐related quality of life (HRQOL) and survival associated with these subgroups. METHODS The authors used survey data from the population‐based Patient Reported Outcomes Following Initial treatment and Long term Evaluation of Survivorship (PROFILES) registry, which were collected between 2008 and 2015 and included 2457 cancer survivors who were <5 years after their cancer diagnosis (colon, rectal, prostate, endometrial, or ovarian cancer or non‐Hodgkin lymphoma). Clinical and survival data were collected through the Netherlands Cancer Registry. Subgroups were defined by IPs (Brief Illness Perception Questionnaire) and prognosis (conditional 5‐year relative survival) into survivors with 1) IPs consistent with prognosis (“realistic”); 2) less threatening IPs than expected based on prognosis (“optimistic”); and 3) more threatening IPs than expected based on prognosis (“pessimistic”). RESULTS Compared with survivors with realistic IPs (1230 survivors), those with optimistic IPs (582 survivors) were found to have a higher HRQOL ( P < .01 on all European Organization for the Research and Treatment of Cancer Quality of Life Questionnaire Core 30 [EORTC QLQ‐C30] scales) and a lower all‐cause mortality (hazard ratio, 0.72; P < .01), whereas those with pessimistic IPs (645 survivors) had a lower HRQOL ( P < .01 on all scales) and a higher all‐cause mortality (hazard ratio, 1.52; P < .01). CONCLUSIONS Optimistic IPs are associated with better HRQOL and survival, even if they may appear to be unrealistic with respect to cancer survivors' prognosis. Survivors with pessimistic IPs appear to have the worst outcomes. Therefore, efforts are needed to provide better support to patients with pessimistic IPs to improve their outcomes. Cancer 2018;124:3609‐17. © The Authors. Cancer published by Wiley Periodicals, Inc. on behalf of American Cancer Society. This is an open access article under the terms of the Creative Commons Attribution‐NonCommercial‐NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non‐commercial and no modifications or adaptations are made.