The object of this paper is to present a preliminary report on an experimental unit within the grounds of the mental hospital, but outside the Mental Treatment Acts, for patients suffering from the psychoneuroses. It is necessary, by way of introduction, to give some account of the way in which this unit came into being. One year before it was opened, we became particularly conscious of the problem of institutionalization, and attempted to study the forces active within the mental hospital which lead a patient, for the most part unconsciously, into a state of institutionalization. This is, of course, no new problem; in every mental hospital there is a nucleus of patients, of varying diagnostic categories, who no longer need to remain in hospital on account of the original symptoms or illness which brought them there, but who, under the subtle influence of the institutional life, have become quite incapable of returning to the outside world. This process of institutionalization cannot be dealt with extensively here, but briefly, the forces at work in bringing about this state are felt to be, firstly, those that tend in many minor or subtle ways to relieve the patient of all responsibility for himself, so that he ceases to be aware of the need to tackle his problems seriously, and, secondly, the authoritarian basis of staff and staff-patient relationships which, however benign, requires an attitude of submission on the part of the patient which readily leads to loss of initiative, and to institutionalization. It was, therefore, decided to reverse this process as completely as possible with a small group of patients, to see what further light could be thrown upon the problem.