The homeless mentally ill, numbering approximately 300,000 persons, are a group neglected and forgotten by society. While deinstitutionalization promised a bright future, the necessary, long-term support to implement deinstitutionalization never materialized. Government policies have helped produce problems that encourage recidivism and homelessness. A model of an integrated and comprehensive system of general and specialized services for the mentally ill includes outreach; assistance for basic needs; adequate mental health care; crisis assistance; comprehensive psychosocial services; rehabilitative and supportive housing options; back-up support, assistance, consultation, and education; recognition and involvement of natural support systems; establishment of grievance procedures and mechanisms to protect client rights; and facilitation of the use by clients of formal and informal helping systems. The success of a program based on this model requires leadership, improved financing, and better coordination among service providers. Without facing squarely the task of providing adequate services for individuals with mental illness living in the community, states can expect continued problems with homelessness. Policymakers and providers should focus on improving community mental health and rehabilitation systems and improving the emergency and transitional shelter network for the homeless mentally ill. (Specific programmatic and legislative responses of the states are included.) (ABL)