The effects of transferring 28 long-stay chronically mentally ill patients from a psychiatric hospital to community placements was evaluated. The Rehabilitation Evaluation Hall and Baker (REHAB; Baker & Hall, 1983) scale was used to assess clients' adaptive and maladaptive behavioural functioning at 12, 18 and 24 month intervals following the hospital baseline. Social contacts and inpatient readmissions were also assessed. The results showed that clients' general adaptive functioning and maladaptive behaviour, on average, remained stable across the hospital baseline and two year follow-up period. Clients with frequent social contacts were found to have significantly better adjustment on a number of the REHAB subscales and those who exhibited more maladaptive behaviour were more likely to be readmitted to a psychiatric inpatient unit. Overall the results were encouraging with relatively low readmission rates, however, approximately 10% of clients showed significant difficulty adjusting in the community. The implications of the findings for chronically mentally ill people and suggestions for community programmes are discussed. © 1998, Cambridge University Press. All rights reserved.