The study reported herein a randomized controlled trial was conducted to test the effectiveness of a nurse-led, needs-based psycho-education program for Chinese patients with first-onset mental illness over a 6-month follow-up. Ninety-six families of Chinese patients with schizophrenia newly referred to one outpatient clinic in Hong Kong were randomly assigned to a nurse-led psycho-education program or usual outpatient care, each comprising 48 subjects. The patients’ mental health, illness insight, self-efficacy, services utilization, and hospitalization rates were measured at recruitment and at one week and six months post-intervention. The patients in the psycho-education program reported significantly greater improvements in mental health, insights into treatment and illness, and hospitalization rates over the 6-month follow-up, when compared with those who received usual care. The findings provide evidence that the needs-based, nurse-led psycho-education program can improve the health conditions and treatment insights of Chinese out-patients with first-onset mental illness.