Beginning with the HMO Act of 1973, managed care, a system for controlling health care costs, rapidly expanded and gained influence as the main vehicle for health care delivery in the United States. Implementation of managed care principles in the mental health arena has generated much debate, particularly with respect to issues of quality of care. The authors briefly trace the development of managed care and evaluate its impact on the practice of psychology. The extant literature is reviewed with specific attention to issues of quality of care, confidentiality of patient information, and shifting practice patterns of clinicians. Finally, the future of professional psychology within the context of managed care is examined, and the implications of newly created mental health roles for practitioners, training programs, and organized psychology are discussed.