<b><i>Background:</i></b> A primary goal of dialectical behaviour therapy (DBT) is to reduce self-harm, but findings from empirical studies are inconclusive. The aim of this study was to assess the effectiveness and cost-effectiveness of DBT in reducing self-harm in patients with personality disorder. <b><i>Methods:</i></b> Participants with a personality disorder and at least 5 days of self-harm in the previous year were randomised to receive 12 months of either DBT or treatment as usual (TAU). The primary outcome was the frequency of days with self-harm; secondary outcomes included borderline personality disorder symptoms, general psychiatric symptoms, subjective quality of life, and costs of care. <b><i>Results:</i></b> Forty patients each were randomised to DBT and TAU. In an intention-to-treat analysis, there was a statistically significant treatment by time interaction for self-harm (incidence rate ratio 0.91, 95% CI 0.89–0.92, p < 0.001). For every 2 months spent in DBT, the risk of self-harm decreased by 9% relative to TAU. There was no evidence of differences on any secondary outcomes. The economic analysis revealed a total cost of a mean of 5,685 GBP (6,786 EUR) in DBT compared to a mean of 3,754 GBP (4,481 EUR) in TAU, but the difference was not significant (95% CI –603 to 4,599 GBP). Forty-eight per cent of patients completed DBT. They had a greater reduction in self-harm compared to dropouts (incidence rate ratio 0.78, 95% CI 0.76–0.80, p < 0.001). <b><i>Conclusions:</i></b> DBT can be effective in reducing self-harm in patients with personality disorder, possibly incurring higher total treatment costs. The effect is stronger in those who complete treatment. Future research should explore how to improve treatment adherence.