In recent years South Africa has taken some important steps forward in strengthening its mental health systems. Mental health legislation has been reformed and there is some level of policy commitment to mental health. However, there remain ongoing challenges, largely related to implementation. The aim of this paper is to review the major challenges facing the South African mental health system, to provide a greater understanding of these challenges (as articulated by stakeholders from a wide range of sectors) and to highlight stakeholders' recommendations about the best way to address them. Ninety nine interviews and 12 focus group discussions were conducted with stakeholders drawn from the national, provincial and district levels. The major challenges identified include: the lack of officially endorsed mental health policy; the continued low priority of mental health; limited intersectoral policy integration; stigma and discrimination; inadequate integration of mental with primary health care; and ‘de-hospitalisation’ rather than ‘de-institutionalization’. Recommendations include: developing an overarching national mental health policy; lobbying for mental health on national policy agendas; including mental health in poverty alleviation programmes; greater educational and awareness-raising campaigns; standardised evidence-based training of health staff; and the development of community-based mental health services.