The report assesses the effectiveness of STETS, the Structured Training and Employment Transitional Services, a project to prepare mentally retarded young adults for competitive employment. An initial section provides an overview on transitional employment, including sections on public policy and transitional employment and related services. The STETS demonstration is described in terms of its model, underlying research issues, and the data collection process. Implementation of the model is the focus of chapter 3 which examines the sample selection process, the response rate to surveys, the quality of data, and the use of analytic methodologies (impact analyses and benefit-cost analyses). The succeeding six chapters document STETS impact on the following aspects: (1) employment, earnings, and other labor market outcomes; (2) training and schooling; (3) public transfer dependence; (4) economic status, independence, and life-style; (5) benefits and costs; and (6) participants' outputs. Among key findings are that STETS improved the postprogram employment prospects of mentally retarded young adults, that participants benefitted substantially from the program, and that STETS created intangible benefits by increasing available employment and social opportunities. Policy conclusions are noted regarding program potential to mitigate the independence and employment problems of mentally retarded young adults, program design and targeting, and program benefits and costs. Six pages of references, supplementary tables, survey design and implementation, and benefit-cost analysis methods and results are appended. (CL)