Background: This study examined the relation between stress and change in emotional and behavioural problems in children and adolescents referred for mental health services. Method: At three waves across four years, children and their parents (N = 310, mean age at the first wave = 11.26 years, SD = 3.18) reported emotional and behavioural problems, as well as stressful life events (parent report) and perceived stress (child report). Results: Major life events before referral were associated with higher levels of parent-reported internalising and externalising problems at referral. Life events after referral were associated with a slower recovery from internalising problems. The associations between stressful life events and the course of parent- and self-reported problems were mediated by children's subjective feelings of stress. Conclusion: Stressful life events appear to interfere with recovery from internalising problems in the years after referral through increasing the experience of stress in daily life. © 2008 The Authors.