OBJECTIVE: The study examined the level of community integration achieved by patients discharged from the state hospital into the community in compliance with a regionalization policy in Vermont that sought to reduce the need for central hospitalization through expansion of community capacity. METHODS: The population in residence at the state hospital on August 30, 1989, was tracked longitudinally as patients were discharged into one of Vermont's ten catchment areas. Structured interviews about the current status of the discharged individuals were conducted four years later with case managers, nursing home personnel, and community care home operators. Service utilization and hospitalization data were obtained from the Vermont Department of Mental Health database. RESULTS: Of 122 patients in residence at the state hospital on the given date, 58 were discharged into the community, of whom 46 consented to participate in the study. At follow- up, about half lived in structured residential settings. Of the 46 followed, 87 percent were rehospitalized during the study period for periods ranging from three months to one year. Although participants had adequate levels of support both from within and outside the mental health system, their integration into the community was low in terms of their use of community resources, stigma-related problems, and difficulties gaining access to services. CONCLUSIONS: The regionalization policy accomplished some of its goals, especially those related to downsizing the state hospital, placing clients in community residential settings, and enhancing the range of community services. The more pervasive and insidious problems of community integration faced by consumers were not effectively mitigated by the policy.