Identity is a major developmental task for adolescents, and the development of ethnic identity is a unique and significant developmental task for many adolescents. This article reviews theoretical and empirical literature that informs our understanding of the development of a positive ethnic identity, and the consequences for adolescent mental health. The review includes research on both psychological and behavioral outcomes for adolescents; the relationships among ethnic identity, discrimination, and mental health; and the role of racial socialization in ethnic identity development and mental health. The authors also pay particular attention to ethnic identity and academic achievement. Overall, this review supported the conclusion that a strong, positive ethnic identity benefits adolescent mental health and academic success. The authors conclude with a discussion of strategies for parents, teachers, and schools to support the development of a positive ethnic identity in adolescents of color.