Objective. The objective of this study was to evaluate the effect and cost-effectiveness of a self-management intervention, delivered as part of routine care in an adult mental health service. Method. In a community mental health setting, routine care was compared with routine care plus a nine-session intervention (the Optimal Health Program) using a non-randomised controlled design. Adult (18–65 years) consumers of mental health services in the Australian Capital Territory were eligible for participation. Results. The Optimal Health Program was associated with significant improvements in health and social functioning as measured by the Health of the Nation Outcome Scale (average change relative to control: –3.17; 95% CI –4.49 to –1.84; P < 0.001). In addition, there was a reduction in hospital admissions in the treatment group (percentage of time in hospital reduced from 3.20 to 0.82; P = 0.07). This translated into a net cost saving of over AU$6000 per participant per year (uncertainty range AU$744 to AU$12 656). Conclusions. This study shows promising results for incorporating a self-management program into routine care to improve the health and social functioning of mental health consumers in a cost-effective manner. What is known about the topic? Current literature supports the efficacy of structured self-management programs for chronic conditions such as diabetes (type 1 and 2) and asthma, but there remains limited evidence that self-management programs improve outcomes for people with mental illness. What does this paper add? This study adds to the body of evidence supporting self-management as a cost-effective adjunct to routine care in mental health services. What are the implications for practitioners? Our study supports the feasibility of clinicians delivering cost-effective self-management programs as part of routine mental health service delivery.