The uses and effects of caffeine as a psychoactive drug in chronic psychiatric inpatient groups are described. Caffeine use and abuse is linked etiologically to diverse psychiatric disorders; its mechanisms of action are examined in relation to anxiety, anxiety neuroses, psychosis, schizophrenia, and caffeine intoxication and dependence. It is postulated that deleterious effects may result from the interaction of caffeine with commonly prescribed psychotropic drugs. A possible model of caffeine abuse is discussed. Increased public education about potential health problems related to caffeine consumption is suggested, and further controls of caffeine in psychiatric settings are recommended.