Objective:To compare outcomes of care from assertive community treatment teams with care by community mental health teams for people with serious mental illnesses. Design: Non-blind randomised controlled trial. Setting: Two inner London boroughs. Participants: 251 men and women under the care of adult secondary mental health services with recent high use of inpatient care and difficulties engaging with community services. Interventions: Treatment from assertive community treatment team (127 participants) or continuation of care from community mental health team (124 participants). Main outcome measures: Primary outcome was inpatient bed use 18 months after randomisation. Secondary outcomes included symptoms, social function, client satisfaction, and engagement with services. Results: No significant differences were found in inpatient bed use (median difference 1, 95% confidence interval -16 to 38) or in clinical or social outcomes for the two treatment groups. Clients who received care from the assertive community treatment team seemed better engaged (adapted homeless engagement acceptance schedule: difference in means 1.1, 1.0 to 1.9), and those who agreed to be interviewed were more satisfied with services (adapted client satisfaction questionnaire: difference in means 7.14, 0.9 to 13.4). Conclusions: Community mental health teams are able to support people with serious mental illnesses as effectively as assertive community treatment teams, but assertive community treatment may be better at engaging clients and may lead to greater satisfaction with services.