Identifying optimal out-of-home placements for child welfare-involved youth is challenging. Examples of youth recovering within each “out-of-home” placement type (foster, relative, residential) are evident, as are examples of youth who are deteriorating. The heterogeneity in developmental history and current functioning of youth makes blanket policies regarding placement unwise. Examination of developmental heterogeneity and functioning of youth in the welfare system can provide insights about factors influencing outcomes, thereby informing practice, program and policy. We explore whether current relational health (connectedness) promotes positive outcomes for child welfare-involved youth while controlling for developmental risk (history of adverse, and lack of relationally positive, experiences). Clinicians at 19 organisations serving child welfare-involved youth used a neurodevelopmentally informed approach to intervention, the Neurosequential Model of Therapeutics (NMT), which includes metrics to assess the developmental timing of children's risk, “connectedness” and neurodevelopmental functioning (e.g., sleep, arousal, cortical control). Data-driven statistical techniques were used to produce stable, generalisable estimates. Risk during the perinatal (0–2 months) period significantly predicted children's functioning; current relational health predicted outcomes more strongly. Although early life developmental risk has a persistent effect on functioning, relationally supportive contexts may mitigate this risk. Improving relational contexts of child welfare-involved youth, regardless of placement type, is key.