Rest homes have become a major component of the health care system for frail elderly persons and deinstitutionalized psychiatric patients. Although psychoactive medications are frequently used in rest homes, there is little detailed information about the extent of such use, its supervision, or its effects. In a survey of a random sample of 55 rest homes in Massachusetts, we found that 55 percent of the residents were taking at least one psychoactive medication. Antipsychotic medications were being administered to 39 percent; of these, 18 percent were receiving two or more such drugs. In a follow-up investigation, we studied 837 residents in 44 rest homes with particularly high levels of antipsychotic-drug use. About half the residents had no evidence of participation by a physician in decisions about their mental health during the year of the study. A third of the residents had performance deficits on mental-status testing that indicated serious cognitive impairment, although the causal relation of such impairment to medication use could not be determined. Six percent had evidence of moderate or severe tardive dyskinesia, probably as a side effect of medication. An assessment of staff competence revealed a low level of comprehension of the purpose and side effects of commonly used psychoactive drugs. We conclude that psychoactive drugs are widely used in rest homes, with little medical supervision or understanding by staff members of their possible side effects.