Veterans Mental Health Councils (VMHCs) have been established at many Veterans Affairs (VA) medical centers to promote recovery and improve mental health services. Though research shows that consumer-led advisory councils may produce a number of positive outcomes, the aspects of implementation critical for VMHC effectiveness have not been identified. The purpose of this study was to identify factors influencing effective functioning of VMHC, including contextual factors affecting council success. A key goal was to understand how participants defined effective council functioning. In-depth semistructured phone interviews were conducted with 15 council members and VA-employed staff liaisons sampled purposively from a broader group of volunteer participants. Inductive and iterative grounded theory analytic techniques were used to identify influential structural and process elements. Findings suggested that characteristics of council members, staff liaisons, and VA medical centers interact over time to shape council implementation and the effective functioning of councils along two dimensions-setting and accomplishing council goals and supporting recovery among members. VMHCs can develop members and improve the quality of VA mental health services when they are well implemented and supported. Mental health clinicians and supervisors can support councils in several ways. Additional research is needed to explore contextual differences in councils and to quantify the value added to VA mental health services by effective VMHCs. (PsycINFO Database Record (c) 2019 APA, all rights reserved).