Persons schooled in the behavioral sciences observed 283 randomly selected police officers in a large Northern city in their daily interactions with citizens for 2,200 hours over 14 months during 1980-1981. The observer determined the presence of mental illness in persons encountered by officers via a symptom checklist. Encounter characteristics were coded with an instrument designed for the study. Overall, 1,382 police-citizen encounters involving 2,255 citizens were observed and coded. Only 4 percent of the citizens exhibited signs of mental disorder. Of the three dispositional options -- arrest, hospitalization, or informal handling -- officers most often handled mentally ill citizens via informal dispositions, but mentally ill persons had a significantly higher arrest rate than 'normal' persons. This was not because of crime differences between the mentally ill and 'normal' persons but rather because of the annoying behavior of the mentally ill persons and the absence of alternative dispositions for restraining them. To reduce the criminalization of nondangerous mentally ill persons, officers should be trained to recognize and manage such persons, and those with misdemeanor charges pending should be treated in a mental health facility. An integrated care-giving system should reduce the number of persons who are managed primarily by the criminal justice system. Tabular data and 89 references.