Objective: An approach referred to as "supported housing," based on principles of consumer choice, integrated community housing, and flexible services, is replacing residential treatment facilities for persons with psychiatric disabilities. To improve understanding of the new approach, its evolution, and issues involved in its implementation, this paper reviews studies of the effectiveness of traditional housing programs and early reports of the development of supported housing programs. Methods: A data base of more than 4,000 journal articles and book chapters published over the past 15 years was searched; both research studies and policy analyses were included. Results and conclusions: Because of national and state policy shifts toward supported housing and growing evidence that both consumers and their families favor this new approach, supported housing models appear to be increasingly replicated throughout the U.S. Innovative financing strategies, such as forming coalitions to develop housing or creating capital funds, have been implemented. Results from studies of establisbed programs indicate that support services for consumers should include working with individuals to formulate their housing and support goals; financial assistance in acquiring long-term stable housing; help in searching for an apartment and moving assistance in managing money and participating in leisure activities; assistance with medication; ongoing monitoring of needs; crisis support; and peer support. Future research should focus on promoting consumers' choices and organizing flexible services to help them succeed in the community.