BACKGROUND: Early Intervention in Psychosis services improves outcomes for young people with psychosis, but 25% disengage in the first 12 months with costs to their mental health. OBJECTIVES: To refine a toolkit and training and evaluate effectiveness, implementation, and cost-effectiveness of the Early Youth Engagement-2 intervention to reduce disengagement. DESIGN: Cluster randomised controlled trial with economic and process evaluation. RANDOMISATION: Randomisation at team level stratified by site. MASKING: Research assistants, outcome assessors and statisticians were masked to treatment allocation for the primary disengagement and cost-effectiveness outcomes. Participants and teams administering the interventions were unmasked. SETTING: Twenty Early Intervention in Psychosis teams in five sites across England. PARTICIPANTS: A total of 1027 young people (14-35 years) with first-episode psychosis (F20-29, 31; ICD-10); 20-282 Early Intervention in Psychosis staff. INTERVENTION: Team-based motivational engagement (Early Youth Engagement-2) intervention, delivered by Early Intervention in Psychosis clinicians alongside standardised Early Intervention in Psychosis, supported by the implementation toolkit (training, website and booklet series). COMPARISON: Standardised Early Intervention in Psychosis, including National Institute for Health and Care Excellence guidelines approved interventions. MAIN OUTCOME MEASURES: Primary outcome - time to disengagement over 26 months (days from date of allocation to care co-ordinator to date of last contact following refusal to engage with service, or lack of response to contact for consecutive 3-month period). Secondary outcomes - mental health, recovery, quality of life, service use, at 6 and 12 months. Economic outcomes - National Health Service mental healthcare costs, wider societal care costs, clinical and social outcomes over 12 months; cost-effectiveness. Process evaluation outcomes - fidelity to the Early Youth Engagement-2 model, implementation process scores, therapeutic alliance, qualitative outcomes. RESULTS: Disengagement was 16% across both arms. The multivariable Cox regression on 1005 participants estimated an adjusted hazard ratio for Early Youth Engagement-2 + standardised Early Intervention in Psychosis (n = 652) versus standardised Early Intervention in Psychosis service alone (n = 375) of 1.07 (95% confidence interval 0.76 to 1.49; p = 0.713). There were no observed differences between arms for any secondary outcomes. The health economic evaluation indicated lower mean mental healthcare costs of -£788 (95% CI -£3571 to £1994) and marginally improved mental health states for intervention participants. Early Youth Engagement-2 participants spent 30 more days per year in education and training (95% CI 1.52 to 53.68; probability positive outcome for the intervention: 99%), but these outcomes must be viewed very cautiously as only 22% of the sample provided data. The process evaluation revealed heterogeneous implementation fidelity and constant pressure to adapt to widespread disruption from COVID-19. There was no effect on therapeutic alliance: the most likely active change mechanism was through psychoeducation. LIMITATIONS: Lower than expected disengagement, high loss to follow-up and impact of COVID-19 on fidelity, implementation and outcomes. CONCLUSIONS: In the primary clinical effectiveness analysis, 95% confidence limits ruled out a reduction of more than 24% in the risk of disengagement with the Early Youth Engagement-2 intervention. In a cost-effectiveness analysis, estimates fell in the direction of dominance of the Early Youth Engagement-2 intervention (reduced costs, marginally better mental health states). FUTURE WORK: Dissemination of the booklet and website resources and an adapted version of the model as stand-alone tools for use in good-practice routine Early Intervention in Psychosis care. STUDY REGISTRATION: This study is registered as ISRCTN 51629746. FUNDING: This award was funded by the National Institute for Health and Care Research (NIHR) Health and Social Care Delivery Research programme (NIHR award ref: 16/31/87) and is published in full in Health and Social Care Delivery Research; Vol. 13, No. 33. See the NIHR Funding and Awards website for further award information.