Tobacco dependence is the leading cause of death in persons with psychiatric and substance use disorders. This has lead to interest in the development of pharmacological and behavioral treatments for tobacco dependence in this subset of smokers. However, there has been little attention paid to the development of tobacco-free environments in psychiatric institutions despite the creation of smoke-free psychiatric hospitals mandated by the Joint Commission for Accreditation of Health Organizations (JCAHO) in 1992. This review article addresses the reasons why tobacco should be excluded from psychiatric and addictions treatment settings, and strategies that can be employed to initiate and maintain tobacco-free psychiatric settings. Finally, questions for further research in this field are delineated. This Tobacco Reconceptualization in Psychiatry is long overdue, given the clear and compelling benefits of tobacco-free environments in psychiatric institutions.