Following a brief introduction, this paper focuses on how the Texas Project for Elders, one of ten sites in the country participatng in the National Long-Term Care Channeling Demonstration Project (Channeling), has taken into account the mental health needs of clients and caregivers both in the development and delivery of services. The clients served by Channeling are described in terms of age, sex, referral sources, and presenting problems. The general role of the Channeling case manager in both basic and complex organizational models is explained, while the basic model, which was specifically implemented in the Texas Project, is described in greater detail. The staff organization, staff to client ratio, and the basic assumptions that guided the development of services (i.e., a high prevalence of untreated mental health problems, the need for an interdisciplinary approach, case managers as advocates and negotiators, and the need to address the mental health needs of caregivers) are presented. The preparation of the case managers is discussed including such training foci as problem identification, communication techniques, client assessment, and information synthesis. Interagency relationships with psychiatric settings are described. Service delivery experiences are presented including data on mental health problems, interventions (e.g., community and in-home consultations and counseling services), and the particular demands of the case manager role. The paper concludes with an overview of the project highlighting its uniqueness in regard to population served, staff roles, and services provided. (BL)