During the last four decades, Uganda has experienced repeated cholera outbreaks in communities; no cholera outbreaks have been reported in Ugandan health facilities. In October 2008, a unique cholera outbreak was confirmed in Butabika National Mental Referral Hospital (BNMRH), Uganda. This article describes actions taken to control the outbreak, challenges, and lessons learnt. We reviewed patient and hospital reports for clinical symptoms and signs, treatment and outcome, patient mental diagnosis, and challenges noted during management of patients and contacts. Out of 114 BNMRH patients on two affected wards, 18 cholera cases and five deaths were documented for an attack rate of 15.8% and a case fatality rate of 28%. Wards and surroundings were intensively disinfected and 96 contacts (psychiatric patients) in the affected wards received chemoprophylaxis with oral ciprofloxacin 500 mg twice daily until November 5, 2008. We documented a nosocomial cholera outbreak in BNMRH with a high case fatality of 28% compared with the national average of 2.4% for cholera outbreaks in communities. To avoid cholera outbreaks and potentially high mortality among patients in mental institutions, procedures for prompt diagnosis, treatment, disinfection, and prophylaxis are needed and preemptive use of oral cholera vaccines should be considered.