Occupational therapy programs form an essential component of the overall treatment program on medical psychiatry units for patients with depression, physical debilitation, and cognitive dysfunction. This article outlines theoretical and practical aspects of developing an occupational therapy program for medical-psychiatric inpatients. Emphasis is placed on accurate assessment of cognitive and physical functioning to facilitate stratification of patients into appropriate therapeutic activities that are commensurate with their level of functioning. The theoretical basis and orientation of occupational therapy is also discussed vis-à-vis its relevance to the treatment of patients with concurrent medical and psychiatric illness.