Although the use and prevalence of Web-based mental health applications have grown over the past decade, many of these services suffer high rates of attrition. This is problematic, as face-to-face support for mental health is limited. To determine appropriate design guidelines for increasing engagement, we conducted a study of First-Episode Psychosis (FEP) patients and reviewed theories on the use of existing online services. We produced a set of design goals, developed an online application that combined social networking and online therapy within a clinician-moderated site, and conducted a 6-week trial with a group of young FEP patients. The design goals, based on existing theory including Supportive Accountability and Positive Psychology, are operationlised through a model we call Moderated Online Social Therapy (MOST). The trial results indicate that our implementation achieved the design goals and that the MOST model can inform the development of more effective and engaging online therapies.