The adverse impact on recovery of posttraumatic stress disorder (PTSD) in mild traumatic brain injury (TBI) has been demonstrated in returned veterans. The study assessed this effect in children's health outcomes following TBI and extended previous work by including a full range of TBI severity, and improved assessment of PTSD within a longitudinal design. There were 205 children and adolescents (6 to 15 years of age) who experienced a TBI that were assessed at 2, 3, 6, 12, and 18 months following the TBI. Severity of TBI was classified as mild, moderate, or severe. After controlling for the impact of the severity of TBI, premorbid behavioral and emotional problems and executive function, children with TBI and PTSD did not experience as much psychosocial recovery as those without PTSD. Furthermore the level of psychosocial function was no better than that experienced by children with a severe TBI. In contrast, severe TBI was predictive of a poorer physical recovery in the first 6 months, after which recovery was equivalent across all severity levels.