The aim of this study was to compare the levels of disabilities and challenging behavior in hospital wards and hospital-based bungalows. Fifty clients were randomly chosen from 18 wards in one hospital and 54 clients from six hospital-based bungalows in another hospital. Clients were assessed using the Disability Assessment Schedule and the Aberrant Behaviour Checklist. Results showed that the clients from the hospital-based bungalows were significantly more capable than those on the wards in mobility, toiletting habits, washing, communication skills, domestic, handicrafts, and occupational skills. Clients from the hospital-based bungalows displayed significantly more severe challenging behavior than those from the wards. The speculative reasons included (1) clients in the hospital-based bungalows were still trying to adjust to the transition from hospital wards to purpose-built bungalows, (2) the burnout of staff in the hospital-based bungalows resulted in a low level of engagement with clients, (3) the different clinical characteristics of clients in both settings. Correlations were performed to examine the associations between challenging behavior and disabilities. The results showed that on the hospital wards, irritability, agitation and crying were correlated with age. Lethargy and withdrawal behavior were correlated with skills. Stereotypic behavior was also correlated with age. Hyperactivity and noncompliance were correlated with age and mobility. Inappropriate speech was correlated with age, incontinence, skills and repetitive symbolic activities. In the hospital-based bungalows, irritability, agitation and crying were correlated with skills. Lethargy and social withdrawal were correlated with skills and stereotyped behavior. Hyperactivity and noncompliance were correlated with skills, delayed echolalia and repetitive speech.