The effectiveness of salt iodisation in improving the mental development of young children has not been assessed. We implemented a community-based cluster-randomised effectiveness trial in sixty randomly selected districts in the Amhara region of Ethiopia. We randomly allocated each district to treatment and randomly selected one of its villages. In parallel to national salt iodisation efforts, iodised salt was brought early into the markets of the thirty intervention villages before it became widely available in the thirty control villages 4–6 months later. The primary outcome was children’s mental development scores on the Bayley Scales. This was an intention-to-treat analysis using mixed linear models adjusted for covariates and clusters. The trial was registered at ClinicalTrials.gov, NCT013496. We assessed 1835 infants aged 5–11 months at baseline. The same children (85 % of the sample) were re-assessed at 20–29 months when all villages had iodised salt. At endline, urinary iodine concentration was higher in children in the intervention group compared with those in the control group (median 228·0 v. 155·1 µg/l, P=0·001). The intervention group had higher scores compared with the control group on the Bayley composite score (raw scores:130·60 v. 128·51; standardised scores: 27·8 v. 26·9; d=0·13; 95 % CI 0·02, 0·23) and three of the four subscales: cognitive (53·27 v. 52·54, d=0·13; 95 % CI 0·03, 0·23), receptive language (20·71 v. 20·18, d=0·13; 95 % CI 0·03, 0·24) and fine motor (35·45 v. 34·94, d=0·15; 95 % CI 0·04, 0·25). The introduction of iodised salt contributes to children’s higher urinary iodine concentration and mental development.