Early-onset psychotic illnesses in children and adolescents are not as rare as is commonly believed. These disorders, which include schizophrenia, schizoaffective disorder, bipolar disorder with psychotic features, and major depression with psychotic features, often have a chronic and severe course and poor long-term outcome. Many patients with early-onset schizophrenia have greater functional impairments than most patients with adult-onset schizophrenia. Magnetic resonance imaging studies show that patients with early-onset schizophrenia experience substantial gray matter loss during adolescence, which is not observed in studies of patients with adult-onset schizophrenia. The chronic course, severe functional impairments, and poor prognosis of early-onset psychosis create a great need to identify effective and safe treatments for youth with psychosis. Although atypical anti-psychotics have been considered superior to traditional antipsychotics, there has been little controlled information to inform clinical decisions until recently. Over the past 5 years, several studies have been initiated to address these questions. The results of the studies completed to date are reviewed.