OBJECTIVE: The authors investigated the clinical feasibility and the outcome for patients of a program designed as an alternative to acute hospitalization. METHOD: This was a random-design study comparing a conventional inpatient program for urban, poor, severely ill voluntary patients who usually require hospitalization to an alternative experimental program consisting of a day hospital linked to a crisis residence. Patients were assessed with standardized measures of symptoms, functioning, social adjustment, quality of life, and satisfaction with clinical services upon admission to the study, at discharge from the index admission, and at follow-ups 2, 5, and 10 months after discharge. RESULTS: One hundred ninety-seven patients were enrolled in the 2-year research program and followed for 10 months. Of the voluntary patients who would have been admitted to the hospital, 83% were appropriate for the experimental program. The clinical, functional, social adjustment, quality of life, and satisfaction outcome measures were not statistically different for the patients in the two treatment conditions; however, there was a slightly more positive effect of the experimental program on measures of symptoms, overall functioning, and social functioning. CONCLUSIONS: The experimental condition, a combined day hospital/crisis respite community residence, seems to have had the same treatment effectiveness as acute hospital care for urban, poor, acutely ill voluntary patients with severe mental illness.