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Background Intensive community treatment to reduce dependency on adolescent psychiatric inpatient care is recommended in guidelines but has not been assessed in a randomised controlled trial in the UK. We designed a supported discharge service (SDS) provided by an intensive community treatment team and compared outcomes with usual care. Methods Eligible patients for this randomised controlled trial were younger than 18 years and had been admitted for psychiatric inpatient care in the South London and Maudsley NHS Foundation Trust. Patients were assigned 1:1 to either the SDS or to usual care by use of a computer-generated pseudorandom code with random permuted blocks of varying sizes. The primary outcome was number of inpatient bed-days, change in Strengths and Difficulties Questionnaire (SDQ) scores, and change in Children's Global Assessment Scale (CGAS) scores at 6 months, assessed by intention to treat. Cost-effectiveness was explored with acceptability curves based on CGAS scores and quality-adjusted life-years (QALYs) calculated from the three-level EuroQol measure of health-related quality of life (EQ-5D-3L), taking a health and social care perspective. This study is registered with the ISRCTN Registry, number ISRCTN82129964. Findings Hospital use at 6 months was significantly lower in the SDS group than in the usual care group (unadjusted median 34 IQR 17–63 vs 50 days, 19–125, p=0·04). The ratio of mean total inpatient days for usual care to SDS was 1·67 (95% CI 1·02–2·81, p=0·04), which decreased to 1·65 (0·99–2·77, p=0·057) when adjusted for differences in hospital use before randomisation. Scores for SDQ and CGAS did not differ between groups. The cost-effectiveness acceptability curve based on QALYs showed that the probability of SDS being cost-effective compared with usual care was around 60% with a willingness-to-pay threshold of £20 000–30 000 per QALY, and that based on CGAS showed at least 58% probability of SDS being cost-effective compared with usual care irrespective of willingness to pay. We recorded no adverse events attributable to SDS or usual care. Interpretation SDS provided by an intensive community treatment team reduced bed usage at 6 months' follow-up but had no effect on functional status and symptoms of mental health disorders compared with usual care. The possibility of preventing admissions, particularly through features such as reduced self-harm and improved reintegration into school, with intensive community treatment should be investigated in future studies. Funding South London and Maudsley NHS Trust.