This article describes a model for integrating psychiatric rehabilitation services in a managed behavioral health care structure. Psychiatric rehabilitation and managed care are two distinct developments in the provision of mental health services that have proceeded independently though they can have compatible methods and outcomes. Descriptive detail is provided about a state initiative in Iowa to provide psychiatric rehabilitation services to those with serious mental illness through the state-contracted managed behavioral health care corporation. The article describes factors leading to the program's implementation, service delivery structures, reimbursements, personnel requirements, and performance indicators. Evidence for supporting this innovation is provided through a case-controlled outcomes study of mental health service units used and their costs for participants and matched controls.