The 1992 reauthorization of the Juvenile Justice and Delinquency Prevention Act of 1974 added Part E, State Challenge Activities, to the programs funded by the Office of Juvenile Justice and Delinquency Prevention. The purpose of part E is to provide initiatives for States participating in the Formula Grants Programs to develop, adopt, and improve policies and programs in 1 or more of 10 specified Challenge areas. In Focusing on Challenge Activity C, this paper describes community- based alternatives to incarceration and the development and use of objective criteria for the appropriate placement of juveniles in detention and secure confinement. The paper advises that tasks central to the successful implementation of this State Challenge Activity are the local implementation within a statewide framework; a representative planning process; a specific and objective criteria for placement related to the needs and risk of each youth; and a flexible continuum of programs and service that provides effective options for each youth coming into contact with the juvenile justice system. Promising approaches for community-based alternatives to incarceration are described, and seven elements that should be present in successful programs are listed. Some examples of such programs are the expanded use of probation, mediation, restitution, community service, treatment, home detention, intensive supervision, and electronic monitoring. A 14-item bibliography and 18 notes