A substantial body of research has reported negative outcomes due to caregiving, however, little is known about how caring for a young person with mental ill-health impacts on parents and carers. This study aims to examine whether, like carers of older people, they experience elevated levels of caregiver burden and stress. It expands on earlier studies by examining potential mediators of burden and stress, with a specific focus on how activity restriction affects this association. There were 226 Australian parents and carers of young people (12–25 years) experiencing mental ill-health who voluntarily completed a self-report questionnaire reflecting how their young person’s ill-health had affected them over the past month. Hierarchical regression and multiple mediation analyses were conducted to examine the relationship between caregiver burden and stress, and whether adaptive coping, self-efficacy and activity restriction mediated this relationship. Caregiver burden and stress were strongly related, and both activity restriction and self-efficacy mediated their association, with activity restriction having the stronger effect. Strategies aimed at increasing awareness of the impact of activity restriction and encouraging parents and carers to find ways to maintain essential activity may reduce stress, improving mental health and well-being in parents and carers.