Background: Although creative activities are routinely used by occupational therapists working with people with mental health problems, there is little research evidence underpinning the theoretical base. Aim: To explore the clinical utility of creative activities used as a treatment medium by occupational therapists with people with mental health problems. Method: An in-depth grounded theory study of four creative activity groups using observations and semi-structured interviews with five occupational therapists and eight of their clients. Results: Emerging theory suggests creative activities have particular utility as a vehicle for choice and engagement. Different levels of engagement can be experienced including optimal experiences of flow. Through engagement in creative activities skills can be developed and confidence enhanced. Such engagement may lead to an occupation structuring time, providing purpose and restoring the balance between work and leisure. Creative activity groups afford opportunities of friendship, affirmation and support. Conclusions: These preliminary findings raise issues for practice in terms of the user's perspective of choice, strategies to facilitate engagement and potential health gains from using creative activities as a treatment medium. Further research is planned to reach data saturation and establish theory.