This paper analyzes deinstitutionalization and community treatment of psychiatric patients from a sociocultural perspective, discusses the social values and processes of the movement, and presents an overview of the experience of patients in the community. It argues that, in sociocultural terms, deinstitutionalization of the most needy patients has failed. Economic, clinical, and social hypotheses about why these failures have occurred are presented. The analysis suggests that deinstitutionalization has failed in large part because it did not address the sociocultural reasons for institutionalization.