This study assessed the effects of providing treatment in a Specialized Foster Care (SFC) program for children and adolescents who had been previously hospitalized. Cases were randomly assigned for placement in SFC or other extrahospital settings, including residential treatment centers and family/relative homes. The SFC program used carefully selected foster parents who were trained and supervised in the implementation of the child’s treatment plan. One child or adolescent was placed in each home. SFC placements were augmented by individual therapy for the child or adolescent and by case management services, including coordination with schools and employers, weekly clinical staffings, and crisis intervention. Results showed that the SFC model is a viable treatment option for severely emotionally disturbed children and adolescents, that cases in the SFC group were placed outside of the hospital more frequently and quickly than cases in the control group, and that once place outside of the hospital, SFC cases were slightly more successful at maintaining in their communities than were control cases.