Federal regulations for use of neuroleptic drugs in Medicare- and Medicaidcertified nursing homes throughout the United States were implemented October 1,1990. These regulations constitute the first time that prescription drugs are required, by law, to be justified by indications documented in the medical chart. This study used extant data to estimate ineligible neuroleptic use at the individual and nursing home levels had these regulations been in effect in 1976 through 1985. Subjects, randomly sampled admissions (N = 5752) and residents (N = 3191), were followed up for up to 24 months in 60 nursing homes. One half of neuroleptic use in each cohort could be considered ineligible under the regulations; all but one of the nursing homes had one or more individuals who were treated with the ineligible use of neuroleptics. Improvements in documentation and/or prescription of neuroleptic drugs for nursing home elderly will be needed to ensure compliance with these new regulations.