This study examined the extent and correlates of entry into residential care among 672 children and adolescents in state custody who have experienced a psychiatric crisis. Overall, 36% of the sample was placed in residential care at some point after their first psychiatric crisis screening. Among the youth placed in residential care, 54% did so within 6 months of their first crisis screening, with an additional 18% between 6 and 12 months. Psychiatric hospitalization, older age, and type of child welfare placement, independent of psychiatric status, were associated with an increased risk for residential care placement. Having an inpatient psychiatric episode places children at greater risk for residential placement, suggesting that it would be efficient to develop diversion programs from residential placements within and immediately following psychiatric hospital episodes. Youth in psychiatric crisis may also benefit from efforts to include their families as part of the treatment process.