Psychoses of late onset are poorly understood due to a limited number of inconsistent studies. The authors conducted this study to determine the clinical characteristics of a clearly defined group of patients with onset of psychosis after age 65 years and to test the usefulness of DSM-III criteria in diagnosing the condition of these patients. Late-onset psychosis occurred in 8% of the patients admitted to the geropsychiatry unit during the study period. More than three quarters of these patients suffered from either an organic mental disorder or major affective disorder, the remainder having primary psychotic disorder. The diagnoses of the psychotic patients were much less reliable than those of a comparable group of nonpsychotic patients, with more than 5 times as many patients in the psychosis group changing diagnostic categories between the time of their admission and their discharge. DSM-III diagnostic criteria were not well suited for the categorization of many of these patients. For patients with primary psychotic disorder, the criteria artificially subdivided groups of similar patients. For patients with organic mental disorder, the criteria did not provide sufficient guidance for the diagnosis of psychosis in the presence of dementia. All three groups of patients responded to somatic therapies. A subgroup of patients with affective disorder improved without neuroleptic treatment, and several patients with primary psychotic disorder benefited from antidepressant treatment. These results highlight the difficulty inherent in the treatment of patients with late-onset psychosis. Further research is needed to develop adequate diagnostic criteria and to determine which patients will benefit from neuroleptic and/or antidepressant therapy.