Background Clinical and research focus has recently shifted from established psychotic disorders to first-episode psychosis and the prepsychotic phase of illness. Aims To describe the principles, progress and dilemmas associated with the prospective detection, engagement and treatment of young people at risk of developing a psychotic disorder. Method Strategies to identify young people at heightened risk of a psychotic disorder are described. Preventive interventions and results of their evaluation are provided. Results Well-validated criteria for identifying young people at heightened risk of psychosis have been developed, evidence of the efficacy of various psychological and pharmacological interventions in preventing progression has accumulated and progress towards the identification of clinical and neurobiological predictors of transition to acute psychosis has been made. Conclusions The detection, monitoring and treatment of young people in the prepsychotic phase is a growth area in psychiatry The ethical considerations about treatment options, treatment of minors and provision of information about risk status must be treated with sensitivity if the potential benefit to many young people and their families is to be realised.