Purpose - Stigma towards severe mental illness (SMI) is widespread, exacerbating mental health problems, and impacting on help-seeking and social inclusion. Anti-stigma campaigns are meeting with success, but results are mixed. Earlier intervention to promote positive mental health literacy rather than challenge stigma, may show promise, but little is known about stigma development or interventions in younger children. The purpose of this paper is to investigate children's knowledge, attitudes and behaviour towards SMI and whether we can positively influence children's attitudes before stigma develops. Design/methodology/approach - A cross-sectional study investigated mental health schema in 7-11 year olds. An experimental intervention investigated whether an indirect contact story-based intervention in 7-8 year olds led to more positive mental health schema. Findings - Young children's schema were initially positive, and influenced by knowledge and contact with mental illness and intergroup anxiety, but were more stigmatising in older girls as intergroup anxiety increased. The indirect contact intervention was effective in promoting positive mental health schema, partially mediated by knowledge. Social implications - Intervening early to shape concepts of mental illness more positively, as they develop in young children, may represent a more effective strategy than attempting to challenge and change mental health stigma once it has formed in adolescents and adults. Originality/value - This study is the first to investigate an intervention targeted at the prevention of stigma towards SMI, in young children, at the point that stigma is emerging.