Much evidence has indicated that personal networks with family, friends, and community members can enhance health and improve psychological adjustment. Personal networks provide elderly persons in particular with companionship, practical help, and useful advice. The ecological models proposed by Bronfenbrenner (1979) portrays the social networks of an individual as concentric circles which consist of a microsystem, exosystem, and macrosystem. This study examined the differences in the overall ecological environment of the elderly in institutions in comparison to the elderly community residents, and investigated the way in which the changes in the ecological systems influence the elderly's adaptability and adjustment. Institutionalized (N=23) and noninstitutionalized (N=18) older adults' life adjustment was explored using Brofenbrenner's ecological model of human development. Institutionalization alone was not found to be associated with depression, life satisfaction, or locus of control. However, the degree to which the micro, exo, and macro ecological systems were functional was found to be associated with the dependent variables. Particularly, the functioning of the exosystem was found to be associated with depression and life satisfaction, and was the most evident among the institutionalized elderly. (Author/NB)