In this paper, we define psychotherapy as a modality of treatment in which the therapist and patient(s) work together to ameliorate psychopathologic conditions and functional impairment through focus on the therapeutic relationship; the patient's attitudes, thoughts, affect, and behavior; and social context and development. The possible mechanisms of action and active ingredients of psychotherapy in children and adolescents are discussed, with an emphasis on the above-noted domains. The adult psychotherapy literature strongly supports the central roles of the therapeutic relationship and therapeutic empathy; this has been much less intensively explored in the child and adolescent psychotherapy literature. Similarly, there have been few studies examining the mediation of treatment effects by impact on specific domains. Ideally, treatment studies should gather data that can be informative about the impact of putative mediating and moderating psychosocial and biological variables on outcome and course. The results of such studies can aid further refinements in both theories of etiology and improvement in treatments for children and adolescents.