Youth anxiety and depression have long been combined within the empirically derived internalizing syndrome. The two conditions show substantial comorbidity, symptom co-occurrence, and overlap in treatment procedures, but paradoxically diverge in psychotherapy outcomes: strong, positive effects for anxiety and weak effects for depression. Drawing on recent research, we examine candidate explanations for this paradox to help identify strategies for addressing it by improving outcomes for youth depression. Candidate explanations include that youth depression, compared with youth anxiety, has more varied comorbidities and more heterogeneous symptom combinations, has greater uncertainty regarding mediators and mechanisms of change, is treated with more complex and potentially confusing protocols, and has characteristics that may impede client engagement. Candidate strategies for shrinking the psychotherapy effectiveness gap include personalizing through transdiagnostic modular treatment, simplifying therapy by focusing on empirically supported principles of change, developing effective strategies for engaging family members as intervention allies, using shared decision-making to inform clinical decisions and boost client engagement, capitalizing on youth-friendly technological advances, and shortening and digitizing treatments to enhance their accessibility and appeal. Recent advances suggest explanations for the internalizing paradox, which in turn suggest strategies for shrinking the youth anxiety-depression psychotherapy outcome gap; these form an agenda for a promising new era of research.