This paper examines whether placing foster children with relatives, instead of unfamiliar caregivers, institutions, or group homes, increases the effectiveness of foster care and consequently improves children’s well-being. As a source of exogenous variation in kinship placement, I use recent major reform of foster care – state policies that prefer kin placement over other types of foster care settings. Using individual-level panel dataset, the Adoption and Foster Care Analysis and Reporting System (AFCARS), and employing difference-in-differences identification strategy, I find that in the short-run children exposed to law benefit from higher stability of placement and shorter length of foster care episode, but do not experience significant changes in either mental or physical health. In the longer term, kinship foster homes are more efficient in terms of improving safety and providing permanent home through discharge from foster care with a relative. Thus, given the effectiveness of kinship care, policymakers should focus on developing and implementing policies that further facilitate relatives’ involvement in foster care.