Article Descriptorsdeinstitutionalization; cost-effectiveness; community residen tial services; matched comparison; Pennhurst.Seventy people with mental retardation who had moved from a large state institution to small community living arrangements were matched with 70 people who remained at the same institution. They were matched by sex, level of retardation, years institutionalized, selfcare skills, age, and IQ. Developmental growth, opera tionally defined as adaptive behavior change using a research version of the AAMD Adaptive Behavior Scale, was measured for all people; only those people who had been deinstitutionalized demonstrated signifi cant growth. They also received more services. Subse quently, telephone surveys and other procedures were used to identify the inclusive public costs associated with the two groups. Upon comparison, the deinstitu tionalized group required less public money than the institutionalized group, although the financial burden shifted substantially from federal sources to state (and local) funding sources when people moved from the in stitution to community-based facilities. Correlates of costs in the community were explored in a preliminary way.