Youth crime is a serious social problem, as is the high proportion of young offenders in the juvenile justice system who have mental disorders. A recent policy innovation applies the theory of therapeutic jurisprudence and diverts youth with mental disorders to treatment in lieu of further court processing. The expansion of mental health diversion programs reflects an increasingly popular view that there is a causal relationship between youth mental disorders and crime. Policymakers who share this view place greater emphasis on rehabilitation and treatment as a way to reduce crime, rather than on stricter punishment. This paper considers the policy issues around youth mental health diversion programs. In addition, it evaluates the effect of a mental health diversion program for youth that was implemented in Texas. The paper finds that mental health diversion can be used effectively to delay or prevent youth recidivism.