The authors describe the use of jails as mental hospitals, the prevalence of PSMIs in jails, and the core principles of services for incarcerated PSMIs. They note the lack of aftercare services and argue for the institution of ACT as an effective model for reducing arrests and hospitalizations among PSMIs involved in the criminal justice system. Originating in Madison, Wis., in the late 1960's, ACT uses a team approach to provide intense, comprehensive, coordinated, and integrated services (psychiatric, rehabilitative, and social support) to persons with serious and persistent mental illnesses. ACT has been widely implemented and extensively researched in the United States, Canada, and Australia, and has shown clinical effectiveness and cost-effectiveness. Thresholds in Chicago, one of the Nation's largest psychiatric rehabilitation centers, implemented a 2-year ACT Demonstration Project for PSMIs. The project's basic goals are to reduce significantly the numbers of rearrests, reincarcerations, and rehospitalizations among project participants. To achieve these goals, the project assists PSMIs to obtain psychiatric treatment, health care, housing, welfare, and other social services. The project also helps participants to manage their money and adhere to their treatment regimens. 46 references