Substantial reductions in the in-patient census of state hospitals throughout the United States have led to the concentration of large numbers of formerly mentally ill individuals in sheltered living arrangements in local communities. These efforts represent a major change in providing care for the long-term chronic patient. How is the life of this individual affected by community placement? A survey was completed of 499 residents in 234 facilities representing all formerly hospitalized non-retarded mental patients between 18 and 65 years old in California's sheltered care facilities. Results indicate that the social functioning of individuals in the external community is enhanced primarily by the characteristics of the community in which they are placed. In contrast, the social functioning of individuals within the immediate environment of their sheltered living arrangements is most affected by the character of the placement itself. The particular characteristics of communities and facilities found to be most important in addition to the characteristics of the residents which impact on social integration are discussed in the study.