BACKGROUND: The prescribing of antipsychotic drugs has been increasing in nursing homes (NHs) since the availability of second-generation antipsychotic agents, also known as the atypicals, but there is little information on the appropriateness of such prescribing. METHODS: A retrospective analysis using the nationally representative data set of the Medicare Current Beneficiary Survey merged to Minimum Data Sets assessments, medication administration records, and Medicare claims. We identified a sample of 2.5 million Medicare beneficiaries in NHs during 2000-2001 (unweighted n = 1096) to assess prevalence of antipsychotic use, rates of adherence to NH prescribing guidelines, and changes in behavioral symptoms. RESULTS: Approximately 693 000 (unweighted n = 302), or 27.6%, of all Medicare beneficiaries in NHs received at least 1 prescription for antipsychotics during the study period: 20.3% received atypicals only; 3.7%, conventionals only; and 3.6%, both atypicals and conventionals. Less than half (41.8%) of treated residents received antipsychotic therapy in accordance with NH prescribing guidelines. One (23.4%) in 4 patients had no appropriate indication, 17.2% had daily doses exceeding recommended levels, and 17.6% had both inappropriate indications and high dosing. Patients receiving antipsychotic therapy within guidelines were no more likely to achieve stability or improvement in behavioral symptoms than were those taking antipsychotics outside the guidelines. CONCLUSIONS: This study detected the highest level of antipsychotic use in NHs in over a decade. Most atypicals were prescribed outside the prescribing guidelines and for doses and indications without strong clinical evidence. Failure to detect positive relationships between behavioral symptoms and antipsychotic therapy raises questions about the appropriateness of prescribing.