This paper found that problems that have been attributed to residential treatment are products of the historical circumstances in which it evolved, and far from contributing to those problems, its basic concepts provide means for solving them. Challenges facing residential treatment programs include: providing short-term treatment, increasing family involvement, preparing children for life in the community, and offering a “hospital level” of care. The most persistent criticisms of residential treatment over the years have been that it separates children from their parents, pays too little attention to reintegrating families, isolates children from their communities, and fosters an institutional mentality. Although stereotyped as offering long-term treatment and a lesser level of care than psychiatric hospitals, residential programs must now treat profoundly disturbed children who require services no longer readily available in intermediate- and long-term hospitals. The paper concludes with recommendations for each challenge faced; each residential program, including long-term programs that continue to be needed, must develop its own solutions to the distinctive problems posed by the children it seeks to serve, the needs of their families and communities, and the resources available for their treatment. References