Deinstitutionalization has had a significant impact on the mental health system, including the client, the agency, and the counselor. For clients with serious mental illness, learning to live in a community setting poses challenges that are often difficult to overcome. Community mental health agencies must respond to these specific needs, thus requiring a shift in how services are delivered and how mental health counselors need to be trained. The focus of this article is to explore the dynamics and challenges specific to deinstitutionalization, discuss implications for counselors, and identify solutions to respond to the identified challenges and resulting needs.