The study, sponsored by the Mental Health Commission of Canada, also suggests the mentally ill are over-represented compared to others in police shootings, stun-gun incidents and fatalities.
It found that one in 20 police dispatches or police encounters involved people with mental illness, and one in seven contacts between police and the mentally ill ended in arrest.
The study reviewed literature and other studies from around the world, and included in-depth interviews, surveys and focus groups of more than 300 mentally ill people in B.C. who live with schizophrenia, bipolar disorder and other mental illnesses.
"Overall, people with mental illness who are suspected of committing a criminal offence are more likely to be arrested compared with those without mental illness," the report stated.
Mentally ill people tend to have more negative attitudes toward police in comparison to the general population, however 85 per cent indicated police treated them respectfully, the study found.
The most common interactions between police and the mentally ill occurred while they were being transported to hospital or jail during a mental-health crisis or after alleged criminal behaviour.
The study's chief investigator was Dr. Johann Brink, the clinical services director at the Forensic Psychiatric Services Commission at the University of B.C., although he had help from other professors and researchers at UBC, Simon Fraser University, the University of South Florida and the Canadian Mental Health Association.
Ninety per cent of those who took part in the study believed it is very important to train police officers in handling situations involving people with a mental illness.
Most of those who took part in the survey said it would be helpful for police to have access to background information about a person with mental illness even before they arrive at the scene of a call.
No one from the Vancouver Police Department or the RCMP was available to comment on the report, however, the Vancouver department has conducted two studies on officer interactions with the city's mentally ill.
The first report, released in 2008, said about one-third of all police calls were connected to someone suffering from mental illness.
The report, titled Lost in Transition, made several recommendations including that services be increased for those with so-called dual diagnoses of addiction and mental illness, and that a system be set up where police could access records for the mentally ill.
A follow-up to that report in 2010 said little had changed from the "street cop's" point of view. Although the report said there had been progress in housing and moderate and long-term treatment services.
"The key finding in the first Lost in Transition report was that a lack of capacity in the mental health system is failing Vancouver's mentally ill and draining police resources; unfortunately, that tragically remains true."
Some of the interactions between police and respondents were recorded in Friday's report.
"I was sitting on the edge of a bridge, ready to jump off. And they scooped me off the bridge and just said 'Hey, we're going to help you.' It just brings tears to me," said an anonymous participant in the survey about unnamed officers.
"It just, they seemed to care that they saved a life. And it was obvious I was suicidal, and they didn't discriminate, they just saved a life, you know."
Survey participants had several recommendations for changes on the part of police, including better training to understand mental illness and its effects.
"Many participants spoke about previous police interactions in which the officers didn't appear to understand the basics of mental illness, including how it might affect a person's cognition and behaviour," the report said.
Those questioned also said officers should be trained to communicate in a more respectful and effective manner, and treat those who are mentally ill with more compassion.
Other suggestions included that police officers become more adept at using non-aggressive, non-violent approaches when dealing with the mentally ill.
"Many suggested that a police officer's response is a major factor that influences whether an interaction will escalate into aggression and violence," the report said.