Much has been done in the last 50 years to achieve a better understanding of the psychosocial causes and other factors influencing the manifestation of mental illness, but there has been a conspicuous omission. Although gross environmental deficiencies were exposed in old mental institutions, 70 years ago the more subtle maladaptive settings that reinforce chronicity in mental illness have often been forgotten. In this review, the potential of systematic environmental manipulation as a treatment (nidotherapy) and other similar forms of management, used many times in the past but now mainly in forensic settings, is examined. There is now accumulating evidence, reinforced by controlled trials, that planned environmental change, preferably carried out with the full cooperation of the patient, can be a major contributor to therapeutic benefit. It is also very cost-effective. All forms of the environment, physical, social and personal, can be addressed in making assessments, and once a planned way forward has been chosen, progress can be monitored by personnel with limited mental health experience. These interventions have applications in general mental health and occupational health services and deserve much wider use.