Background: Interest in economic evaluation to support strategic decision-making for mental health policy has increased, but the capacity for such analysis remains limited. Aims: To reflect on challenges faced in the production of economic evaluations and the extent to which they are used for mental health policy across Europe. Method: A bespoke questionnaire and literature review were used to collect information on the use of economic evaluation in 17 European countries. Results: The number of evaluations for mental health continues to grow; albeit their quality is patchy. Most concentrate on medications; there are few evaluations outside the health and social care sector. Simple cost-effectiveness analyses dominate, with much less use of cost-utility or cost-benefit analysis. Few have been subject to economic evaluation as part of reimbursement procedures for new drugs and other interventions. Conclusions: There is much scope for practical and methodological development, in particular on outcome measurement and the evaluation of complex non-health system interventions. The variable quality of evaluations suggests that work to build capacity for both their conduct and interpretation is needed. Initiatives such as MHEEN might help promote understanding of the potentially powerful role that can be played by economic evaluation. Declaration of interest: The Mental Health Economics European Network Phase I was supported by a grant (SPC.2002397) from the European Commission, Health and Consumer Protection Directorate. There are no conflicts of interest.