Background: Computerized self-help that has an interactive, conversational format holds several advantages, such as flexibility across presenting problems and ease of use. We designed a new program called MYLO that utilizes the principles of Method of Levels (MOL) therapy - based upon Perceptual Control Theory (PCT). Aims: We tested the efficacy of MYLO, tested whether the psychological change mechanisms described by PCT mediated its efficacy, and evaluated effects of client expectancy. Method: Forty-eight student participants were randomly assigned to MYLO or a comparison program ELIZA. Participants discussed a problem they were currently experiencing with their assigned program and completed measures of distress, resolution and expectancy preintervention, postintervention and at 2-week follow-up. Results: MYLO and ELIZA were associated with reductions in distress, depression, anxiety and stress. MYLO was considered more helpful and led to greater problem resolution. The psychological change processes predicted higher ratings of MYLO's helpfulness and reductions in distress. Positive expectancies towards computer-based problem solving correlated with MYLO's perceived helpfulness and greater problem resolution, and this was partly mediated by the psychological change processes identified. Conclusions: The findings provide provisional support for the acceptability of the MYLO program in a non-clinical sample although its efficacy as an innovative computer-based aid to problem solving remains unclear. Nevertheless, the findings provide tentative early support for the mechanisms of psychological change identified within PCT and highlight the importance of client expectations on predicting engagement in computer-based self-help.