Across Canada, Child Protection Services (CPS) disrupt Indigenous families by apprehending their children at alarmingly high rates. The harms borne by children in out-of-home care (OoHC) have been extensively documented. We examined the impact of OoHC on Manitoba children's health and legal system outcomes to provide rigorous evidence on how discretionary decision-making by CPS agencies can affect these outcomes. In partnership with First Nations researchers, we used linked administrative data to identify Manitoba children (born 2007-2018) served by First Nations and other Manitoba CPS agencies. We compared those taken into OoHC (n=19,324) with those never in care but with an open CPS file due to child protection concerns (n=27,290). We used instrumental variable analysis (CPS agency rates of OoHC as the instrument) to obtain odds ratios (aOR) and 95% confidence intervals adjusted for child, maternal, and family factors. Mean age (yrs±standard deviation) at first CPS contact for children taken into OoHC was 2.8±3.7 (First Nations) and 3.0±3.8 (other), and for children never in care was 4.5±4.5 (First Nations) and 5.1±4.7 (other). Among children served by a First Nations agency, males made up 50.6% (n=5496) in OoHC and 51.0% (n=6579) never in care. Among children served by other agencies, males made up 51.0% (n=4324) in OoHC and 51.0% (n=7428) never in care. Odds of teen pregnancy (First Nations aOR 3.69, 1.40-9.77; other aOR 5.10, 1.83-14.25), teen birth (First Nations aOR 3.23, 1.10-9.49; other aOR 5.06, 1.70-15.03), and sexually transmitted infections (other aOR 7.21, 3.63-14.32) were higher for children in care than children never in care, as were odds of being accused (other aOR 2.71, 1.27-5.75), a victim (other aOR 1.68, 1.10-2.56), charged with a crime (other aOR 2.68, 1.21-5.96), or incarcerated (First Nations aOR 3.64, 1.95-6.80; other aOR 1.19, 1.19-8.04). Being in OoHC worsened children's health and legal system outcomes. The importance of reducing the number of children taken into care was emphasized in briefings to provincial and First Nations governments. The government response will be monitored. Social Sciences and Humanities Research Council (no. 890-2018-0029).