ABSTRACT The aim of this study was to explore the self and identity perspectives among Chinese adolescents with severe mental illness (SMI), with a focus on their illness experience and subjective meaning of a formal diagnosis. Thirty-one Chinese adolescents were interviewed and the interview data were analysed strictly according to principles suggested by the constructivist grounded theory approach. Five theoretical codes emerged in this study, including changes of personal values and beliefs, accumulated persistent developmental challenges and personal stresses, ineffective coping strategies and development, symptoms and development of mental illness, and changed perceptions and understandings of self. A proposed model of “The dynamic interactions of Chinese adolescents’ identity and mental illness”, was constructed and visualized. The results revealed that adolescents’ identity formation is a fluctuating and non-linear process, but tends to be predominantly negative. The negative self, as informed by long-term ineffective coping with accumulated persistent developmental challenges and stressful events, develops towards a more serious status of negative identity and contributes to relapse symptoms, although this impact occurs variably with perceived personal characteristics. Besides, some participants who had achieved a state of “Buddha-like numbness” made a conscious decision to live a seemingly normal life while coexisting with their illness. The study also highlighted the positive aspects of identity formation that can arise from the experience of illness, including an enhanced sense of realism and increased empathy. Our findings will imply much the need for person-centred treatment plan and services that take into account of individual situations.