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This article reports the changes that occurred over a 4-year period at a therapeutic community for persons with schizophrenia when a rehabilitation psychology program was added to the traditional inpatient treatment and eventually replaced it. Data collected using the Community Oriented Programs Environment Scale (COPES) revealed several significant and desirable changes in the quality of the perceived treatment environment, including increases in practical orientation and autonomy subscales. The article describes the specific interventions that account for improvement in the rehabilitation potential of the treatment environment. Conceptual differences between the traditional inpatient psychiatric model and the rehabilitation psychology model are outlined. Value differences between these two models are presented as an explanation for the failure of rehabilitation services offered adjunctively with traditional psychiatric services. The treatment environment changed only when rehabilitation became a central part of the treatment philosophy. The fundamental differences between these two treatment approaches are related to reports of improved outcome from programs using psychosocial models of treatment.