Objectives. The purpose of this study was to examine prevalence rates of psychotropic drug use by elderly nursing home residents 3 years before and 1 year after implementation of the 1987 Omnibus Budget Reconciliation Act drug regulations throughout the United States on October 1, 1990. Methods. A cohort study was conducted of elderly nursing home residents, for each of 4 study years (approximately 33 000 residents per year), of all nursing homes (n = 372) in Minnesota certified by Medicare and Medicaid. Data included (1) health status assessment and psychotropic drug use; (2) nursing home and care characteristics; and (3) county geographic and population characteristics. Results. Annual rates of antipsychotic drug use declined by one third over the 4-year period (23%, 22%, 19%, and 15% from 3 years before enforcement of the regulations to 1 year afterward). All differences were statistically significant. Antianxiety use rates were 11%, 12%, 12%, and 12%, respectively, and antidepressant use rates were 14%, 15%, 16%, 16%, respectively, for the 4 years. The latter two classes of drugs were not affected directly by the regulations. Conclusions. Declines in the rates of antipsychotic drug use appear to be associated with anticipation of the regulations the year before and as the result of the regulations the year after the October 1990 implementation. A hypothesized meditation shift to benzodiazepine drugs was not observed.