A review of the literature on cost comparisons between community settings and institutions for persons with mental retardation and developmental disabilities was conducted. We selected literature for review that was published in peer-reviewed journals and had either been cited in the area of cost comparisons or provided a novel approach to the area. Methodological problems were identified in most studies reviewed, although recent research employing multivariate methods promises to bring clarity to this research area. Findings do not support the unqualified position that community settings are less expensive than are institutions and suggest that staffing issues play a major role in any cost differences that are identified. Implications are discussed in light of the findings.