The facility was authorized in 1927 by the 55th Illinois General Assembly with its first patients arriving in December 1930. In 1954, the patient population peaked at 8,195. In 1983, the facility was authorized for closure by Governor James R. Thompson and closed on December 31, 1985.
In October 1986, the Illinois Veterans home at Manteno was dedicated and still operates on a portion of the grounds of the original psychiatric facility while numerous other building have been demolished. There are very few buildings left, for example, the Morgan Cottage is left along with the sewage plant. These buildings are abandoned but left in original condition. Many other buildings have been renovated for other uses as of July 2009. The site was redeveloped as a VA home, an industrial park, and a portion of the grounds is now the Manteno Municipal golf course. A state hospital cemetery is to the east of the site. The grounds are the now the home of numerous housing developments including a residential treatment center for males and females ages 12 to 21 called Indian Oaks Academy, which is a member of the Nexus family of treatment programs.Longstanding rumors persist regarding the ghosts and haunting of the buildings.