For youth with emotional and behavioral challenges, there is a trend of minority overrepresentation in restrictive settings. "System of care" refers to an approach that emphasizes cultural competence and providing services in the least restrictive setting. This study investigated the relationship between placement restrictiveness, emotional-behavioral functioning, race, and parent perceptions of cultural competence. 356 school-aged youth and their families were interviewed. Study findings revealed no racial differences in the areas of placement restrictiveness and perceptions of cultural competence. Emotional-behavioral functioning and a combination of age and gender influenced placement restrictiveness. Systems of care may be living up to their goal of cultural competence, which has implications for how schools and communities can better serve youth with emotional and behavioral challenges.