This research describes the extent of use of antipsychotic drugs in sheltered-care and examines the effect of these drugs by dosage, age group and psychopathology on rehospitalization and social integration. Data were collected from a large sample of former mental patients representative of all non-retarded mentally ill between 18 and 65 living in community-based sheltered-care in California. Findings suggest that antipsychotic drugs, when used with limited medical supervision, have detrimental effects on the social functioning of the least disturbed. While antipsychotics may short circuit the psychotic process and thereby reduce mental hospital readmissions, social programming is necessary to promote better social functioning.