The focus of the report is the plight of men and women who commit or are alleged to have committed petty offenses and who are frequently homeless on arrest and have mental health histories that have involved short stays in hospitals interspersed with periods in the community (possibly on the streets). The report concludes that the primary problem faced by such mentally vulnerable people is a medical problem rather than a criminal justice concern. The difficulties mentally vulnerable people face in the criminal justice system are exacerbated if they lack secure housing. The criminal justice system in general and prisons in particular cannot resolve the health and housing problems of mentally ill persons. These people should be diverted from the criminal justice system, preferably to a community-based network of services rather than to a mental hospital. The solution to the problem is in the development of community resources and services through a partnership between mental health, criminal justice, and housing agencies. This report provides recommendations for the implementation of such a diversion policy and proposes a pilot program that would provide a multidisciplinary direct diversion and community care service to mentally vulnerable people in contact with the criminal justice system, some of whom will also be homeless.