This paper discusses the tremendous challenges faced by prinson inmates who have serious mental illness and are trying to reenter and reintegrate into the community. The paper also describes different strategies for improving transitional services for these individuals. The paper reviews epidemiologic data that supports the high prevalence of severe mental illness in prisons and examines historical factors that form the basis for the criminalization of the mentally ill. Also discussed is the importance and challenges of providing adequate psychiatric care for mentally ill prisoners during their incarceration. The paper also reviews the many psychosocial and economic challenges facing these individuals upon their release from prison, such as unemployment and vulnerability to homelessness, as well as specific barriers they may encounter in attempting to access community-based mental health services. The paper includes a discussion of some of the more promising strategies for improving the transition of the mentally ill from prison to the community. In the final sections, the paper reviews the evidence for a relationship between serious mental illness and recidivism and briefly discuss emerging alternatives to incarceration of the mentally ill.