THE OBSERVATIONS WERE MADE DURING A 1.5-YEAR FIELD WORK PROJECT IN A NEW YORK HALFWAY HOUSE, WHERE RESIDENTS INCLUDE PERSONS DIAGNOSED WIH SCHIZOPHRENIA, MENTAL RETARDATION, DEPRESSION, ALCOHOLISM, EMOTIONAL PROBLEMS, BRAIN DAMAGE, OR MULTIPLE PROBLEMS. SCHIZOPHRENIA IS THE MOST COMMON DIAGNOSIS AMONG THE RESIDENTS, WHO VARY IN AGE FROM 19 TO 63 AND WHO WERE REFERRED TO THE HALFWAY HOUSE FROM A STATE HOSPITAL, A COMMUNITY MENTAL HEALTH CENTER, PRIVATE DOCTORS, AND OTHER SOURCES. THE STUDY FOCUSES ON TRANSITIONAL GROUP OF 65 PEOPLE WHO RESIDED AT THE HALFWAY HOUSE FROM JULY 1975 THROUGH NOVEMBER 1977. RESEARCH INVOLVED FORMAL AND INFORMAL INTERACTION WITH STAFF AND RESIDENTS. THE EXPERIENCES OF THE RESIDENTS AND THEIR EXPRESSIONS OF SELF-WORTH WERE RECORDED, WITH A VIEW TOWARD EXPLORING INFLUENCES ON BEHAVIOR. THE ADJUSTMENTS AND COMPENSATIONS MADE BY RESIDENTS TO MAINTAIN THEIR BALANCE OF 'SELF' IN THE HALFWAY HOUSE SITUATION WERE STUDIED. THE POSSIBILITY THAT THE HALFWAY HOUSE MILIEU CAN HAVE NEGATIVE EFFECTS ON THE SELF-CONCEPT OF RESIDENTS AND THEREBY REDUCE THE POTENTIAL FOR REHABILITATION WAS CONSIDERED. PROBLEMS WITH THE HALFWAY HOUSE ARE DESCRIBED, PRIMARILY FROM THE RESIDENTS' POINT OF VIEW, AND SUGGESTIONS FOR IMPROVING THE FACILITY ARE OFFERED. SUPPORTING DATA AND A LIST OF REFERENCES ARE INCLUDED. (AUTHOR ABSTRACT MODIFIED--LKM)