Atypical antipsychotic medications are increasingly used for a wide range of clinical indications in diverse populations, including privately and publicly insured youth and elderly nursing home residents. These trends heighten policy challenges for payers, patients, and clinicians related to appropriate prescribing and management, patient safety, and clinical effectiveness. For clinicians and patients, balancing risks and benefits is challenging, given the paucity of effective alternative treatments. For health care systems, regulators, and policymakers, challenges include developing the evidence base on comparative risks and benefits; defining measures of treatment quality; and implementing policies that encourage evidence-based practices while avoiding unduly burdensome restrictions.