Ethnic identity development is associated with positive mental health in young adults from ethnic minority groups. How a sense of belonging and attachment to one's ethnic culture is related to personal mental health recovery remains unexplained. This study examines the experiences of ethnic minority young adults in the U.S. to understand the aspects of culture and identity development that are relevant to their recovery processes. Young adults who were living with chronic mental disorders were recruited from four rehabilitation programs. Interviews produced quantitative and qualitative data. An explanatory sequential mixed methods design was used to integrate the qualitative findings from a sub-group of young adults (n = 44) with the results from the quantitative study. Directed content analysis was used to analyze the qualitative data, and the integrated data were analyzed in joint displays. The prominent themes characterizing ethnic identity development in personal recovery were (a) cultural history, traditions, and values; (b) mental illness stigma within the ethnic community; and (c) bias and discrimination in mental health services. Young adults with high ethnic identity development reported having more support from family, but they also described experiences with stigma and racism. The integrated results suggest that ethnic identity development promotes mental health recovery in minoritized young adults through social support and improved well-being and resilience. Experiences of intersectional stigma and structural racism associated with ethnic identity can interfere with self-determination and access to care among minoritized Hispanic/Latine, Black, and multiracial young adults in the U.S.