The increasing presence of the mentally ill among the nation's homeless is the topic of this report. The problems presented by deinstitutionalization are discussed, including: (1) the homeless mentally ill as a disruptive element of society; (2) mentally ill persons who shuttle between the hospital and the community; (3) young chronic patients who are homeless and have received only minimal help; and (4) inadequate living arrangements and support services for the chronically mentally ill. The promise of deinstitutionalization and its failure in practice are discussed. Legislative guidelines for care of the homeless mentally ill are listed, including access to medical care and ongoing case management. Specific state legislation aimed at the homeless chronically mentally ill is presented. In a discussion of future implications and directions, the needs to improve mental health service to prevent homelessness among the chronically mentally ill, and to improve shelter networks are highlighted. A case study of California is presented. Five references are listed. (ABL)