Young people coping with first episode schizophrenia may be predisposed to illness engulfment whereby the illness entirely defines self-concept. They require psychosocial intervention to preserve an identity distinct from illness, promote hopefulness, and minimise the impact of stigma, enabling them to embrace a healthy sense of self and an optimistic future. The purpose of this study was to evaluate a group intervention designed to promote healthy self-concepts by reducing self-stigmatisation and engulfment among young adults recovering from first episode schizophrenia. Participants at two first episode psychosis clinics, one in Toronto and one in Ottawa, were assigned to one of two groups: intervention plus treatment as usual, or a control with only treatment as usual. A repeated measures analysis revealed that immediately post-intervention, the treatment group significantly improved on engulfment, hope, and quality of life measures compared with the control. No improvement was observed in self-concept, self-esteem, self-efficacy, and stigma. Intervening early in the course of the illness to address engulfment and self-stigmatisation may enable young people to acquire positive attitudes toward themselves and the future. Future longitudinal data are needed to determine whether this intervention will prevent the development of chronicity and demoralisation over time.