Reforms include workplace changes and staff skills becoming more closely aligned to the needs of patients. These, Professor Appleby says in the report Breaking down barriers - the clinical case for change, will bring "a better quality of life, social opportunities and improved physical health".
He also claims that more care can now be carried out in people's homes, often replacing the need for hospital treatment.
The case for change follows controversial attempts to reform the Mental Health Act, proposals currently in debate include the compulsory treatment or detention of people with severe or violent mental health disorders, even if it would not help their condition.
"There has been a major reshaping of front-line services around the needs of patients in the community. However, changes will not end there," Professor Appleby said.
"The next stage in the reconfiguration of mental health services will further strengthen care in the community – breaking down barriers in the way services are delivered."
Mental illness is estimated to cost the nation over £77 billion and accounts for a third of illness in Britain. One sixth of the population suffers from a mental health problem, with more than 1.3 million older people suffering from depression or other mental illness.
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.