Traditional diagnostic classification systems for mental disorders map poorly onto the early stages of illness experienced by young people, and purport categorical distinctions that are not readily supported by research into genetic, environmental and neurobiological risk factors. Consequently, a key clinical challenge in youth mental health is to develop and test new classification systems that align with current evidence on comorbid presentations, are consistent with current understanding of underlying neurobiology, and provide utility for predicting outcomes and guiding decisions regarding the provision of appropriate and effective care. This chapter outlines a transdiagnostic framework for classifying common adolescent-onset mood and psychotic syndromes, combining two independent but complementary dimensions: clinical staging, and three proposed pathophysiological mechanisms. Clinical staging reflects the progression of mental disorders and is in line with the concept used in general medicine, where more advanced stages are associated with a poorer prognosis and a need for more intensive interventions with a higher risk-to-benefit ratio. The three proposed pathophysiological mechanisms are neurodevelopmental abnormalities, hyperarousal and circadian dysfunction, which, over time, have illness trajectories (or pathways) to psychosis, anxious depression and bipolar spectrum disorders, respectively. The transdiagnostic framework has been evaluated in young people presenting to youth mental health clinics of the University of Sydney's Brain and Mind Centre, alongside a range of clinical and objective measures. Our research to date provides support for this framework, and we are now exploring its application to the development of more personalised models of care.