The present review examined the hypothesis that exercise facilitates psychological processes among institutionalized geriatric and psychogeriatric elderly persons. Studies of long-term psychogeriatric patients showed significant cognitive change following a period of moderate aerobic exercise. However, no lasting cognitive effect of long-term exercise was observed for those who became mentally or physically impaired in old age or who could not tolerate strenuous exercise. On the other hand, improvement in cognitive function was reported immediately following an exercise session among geriatric institutionalized patients. Neither long-term nor short-term exercise brought about changes in affect. Although most studies suffer serious methodological shortcomings, the common finding of improved cognitive function immediately following exercise suggests that physical activity does have some arousal effect on cognition in institutionalized elderly persons. More studies are needed to clarify the immediate versus long-term effect of exercise on psychological variables among institutionalized elderly as well as the relationship between physical fitness and cognitive change.