This study examined whether the disposition of juvenile justice encounters among youth with severe emotional disturbance was associated with the likelihood of recidivism. Court dispositions, such as probation and diversion, as well as Medicaid-funded out-of-home mental health treatment, were compared. Data sources included the Florida Department of Juvenile Justice and Medicaid claims data. Youth receiving probation had the highest recidivism rates. Among youth in out-of-home treatment, those receiving treatment in foster care services had the lowest recidivism rates. Youth placed into a diversion program were less likely to be re-arrested for a felony, whereas youth receiving inpatient psychiatric services were less likely to be re-arrested for a misdemeanor. Mental health treatment may reduce the likelihood of youth continuing on increasing criminal trajectories.