Objectives: This study examined the impact of regulations established by the Omnibus Budget Reconciliation Act of 1987 (OBRA-87) on prescriptions for psychotropic drugs, and on research on their use in nursing homes. Methods: Data were collected on drugs prescribed for residents of 39 skilled nursing facilities over the four-year period from 1989 to 1992, bracketing the implementation of OBRA-87 in the fall of 1990. Changes in prescribing patterns were analyzed by drug class, specific target medications and doses, number of drugs prescribed, and multidrug combinations. To determine the effect of OBRA-87 on research, peer-reviewed journals were searched for the number and content of publications on psychotropic drug use in skilled nursing facilities between 1980 and 1996. Results: The number of prescriptions for antipsychotics, sedative antihistamines, and sedative- hypnotics decreased significantly, while prescribing of anxiolytics increased. Qualitative, but not quantitative, shifts occurred in prescriptions for antidepressant drugs, the most frequently used psychotropic medications in all years. Rates of psychotropic polypharmacy remained stable. The number of data-based publications on psychotropic drug use in nursing homes increased after implementation of OBRA-87, but few were related to the effectiveness of drug treatment. Conclusions: Implementation of OBRA-87's nursing home regulations was associated with reductions in use of drugs specifically targeted by this legislation and was a potent stimulus to research, an unanticipated benefit of legislative action. Increased use of anxiolytics, persistent prescribing of anticholinergic antidepressants, enthusiastic adoption of new agents despite a limited research database involving frail patients, and the paucity of new studies reporting data on clinical effectiveness suggest a need for targeted research on treatment outcomes to improve the care of this population.