Psychological intervention can play an important role in treating bipolar disorder and may be most effective when delivered early in the course of illness. At the Early Prevention and Intervention Centre in Melbourne, Australia, we developed and piloted a manualised CBT treatment for youth with bipolar disorder and observed improved functional recovery and greater reduction in depressive symptoms. However, engaging youth in psychological treatment can be challenging. Poor insight is common and often young people want to maintain their independence, view themselves as invulnerable, and do not believe they are at risk of relapse. In this study we sought to identify factors associated with this population engaging in the psychological intervention in a sample of 61 patients aged between 15 and 30 years. A series of logistic regression analyses were performed with engagement (yes/no) as the outcome variable and a range of demographic and clinical variables entered as predictors. One predictor was found to reliably distinguish between groups: SOFAS at 8 weeks. Participants who were generally functioning well at 8 weeks post service admission were more likely to engage in psychological therapy during the 18 months of treatment than individuals who had moderate impairment in functioning. Severity of symptoms and substance use/disorder did not affect engagement. These results suggest that supporting functional recovery during the early stages of treatment of first episode bipolar disorder may assist with later engagement in psychological therapy.