Since the 1950s, the mental health system of developed countries including the United States has shifted towards deinstitutionalization and community mental health systems. In Korea, the mental health system was formally introduced by the enactment of the Mental Health Act in 1995, but still receives much criticism today. The purpose of this study is to analyze the difference between Korea and western countries in the implementation of the mental health system since its introduction in Korea. To this end, this study examines the United States and Japan as exporting countries and analyzes the cultural context of Korea , as well as the process of indigenization since its introduction. In Korea, urbanization and industrialization weakened family protection against mental illness, and mental health-related crime has become a social issue. This has led to the establishment of the mental health system. However, four fundamental factors (difference in social attitude towards mental illness, lack of unified public policy, lack of resources, and difference in medical paradigm) resulted in the failure of deinstitutionalization and the community mental health. Since then, with the criticism of international organizations such as the OECD, constitutional inconsistency for hospitalization procedure, and pressure from opposition of the mental illness interest groups and the resistance of medical professional organizations, the system underwent a passive institutional change in the Mental Health Welfare Act of 2016. However, Korea’s system is substantially difference from that of the United States, which is a major institutional exporting country. While deinstitutionalization resembles that of Japan, the community mental health still has room for improvement.