The effectiveness of a new approach to providing psychiatric rehabilitation services in community settings will be assessed using a combination of quality assurance principles and program evaluation techniques. A new Assertive Community Rehabilitation Program (ACRP) is evaluated and compared with existing hospital rehabilitation programs. Measures of service efficiency, admission, discharge and readmission rates, and service costs are made for 100 new referrals, 99 inpatients and 117 outpatients. Follow-up interviews use standardized measures of clients' quality of life, clinical status, client and staff satisfaction, and community resource utilization. After 19 weeks of operation, the ACRP has prevented more admissions, and discharged more inpatients than the comparison programs. Readmission rates have not differed. Results at the end of the one-year project using this program-based quality assurance approach will facilitate managerial decisions about the future of rehabilitation services.