Objective: This longitudinal study followed 5,978 children in out-of-home care to examine whether placement and permanency outcomes differ between children with and without a history of inpatient mental health treatment. Method: Data were drawn from child welfare and Medicaid records from the state of Illinois. Logistic regression and survival analysis were applied. Results: A history of inpatient mental health treatment preceding out-of-home placement was associated with an increased risk for placement instability for White children and a decreased likelihood of achieving permanency for African American children. Conclusions: Children with an inpatient mental health treatment episode may benefit from assessment of service needs upon their entry into out-of-home care and continued follow-ups for reducing placement disruptions and facilitating timely permanence. (Contains 3 tables and 2 figures.)