Purpose: Health economic evidence of assertive community treatment (ACT) in Denmark is limited. The aim of the study was to assess the costs and outcome of ACT among 174 patients with severe and persistent mental illness in a rural area of Denmark. Methods: The study was based on a quasi-experimental design with a control group from the neighbouring region. Costs and retention in mental health services were analysed by using register data 1 year before and 4 years after inclusion in the study. Data on the use of supportive housing were available for the year before baseline and the subsequent 2 years only. Results: Seventy eight percent of the patients receiving ACT were in contact with psychiatric services at the 4-year follow-up, while 69% of the patients in the control group had contact with psychiatric services (P < 0.17). Days in supportive housing were lower for the ACT group before baseline and remained so (dropping to zero) for the subsequent 2 years. Over 4 years, the mean total costs per patient in the group receiving ACT were DDK 493,442 (SE = 34,292). Excluding costs of supportive housing, the mean total costs per patient of the control group were DDK 537,218 (SE = 59,371), P < 0.53. If these costs are included, however, the mean total costs for the ACT group are unchanged, whereas costs for the control group rise to DDK 671,500 (SE = 73,671), P < 0.03. Conclusion: While ACT appears to have resulted in a significant reduction in costs for psychiatric hospitalizations, baseline differences in use of supportive housing make the effects of ACT on overall costs more ambiguous. At worst, however, overall costs did not increase. Given the generally acknowledged clinical benefits of ACT over standard outpatient care, the results support further dissemination of ACT in Denmark.