The aim of this study was to compare the psychological health of children in foster care with that of children in institutional care. Social workers were asked to assess the psychological health of the children as well as several other criteria on the basis of an analysis grid. Our sample consisted of 568 children placed in foster care and 661 children placed in institutions. Our results show that children in care who lived longer with their birth parents have a lower psychological health. Furthermore, the psychological health of children in residential care is lower than children placed in foster families. As children in institution are placed later than children in foster families, this may partially explain the lower psychological health of children in residential care. As a result, children in residential care have experienced more abuse and neglect and witnessed more domestic violence than children in foster care. In addition, children in residential care have more poor-quality contacts with their birth parents than children in foster family. These contacts negatively influence their psychological health. Finally, the factor that most influences the psychological health of children in care is the quality of the relationship with the people who care for them on a daily basis. Again, children placed in foster families have better-quality relationships with their foster families than children placed in institutions.