Objective: Children of parents with severe mental illness have an increased risk of offending. Studies suggest that risk factors such as parental offending and social disadvantage may be associated with the increased risk. This paper assesses the impact of these risk factors on offending rates in the offspring of women with severe mental illness compared to offspring of unaffected women. Methods: This is part of a longitudinal record-linked whole-population study of 467,945 children born in Western Australia from 1980 to 2001 to mothers with severe mental illness and mothers with no recorded psychiatric illness. These data were linked to Western Australia corrective services data producing a dataset of 12,999 people with at least one offence (3.7% of birth cohort). Cox proportional hazard was used to calculate incidence rate ratios of offspring offending. Results: The offending rate for offspring of mothers with severe mental illness (cases) was almost three times the rate for offspring of unaffected mothers (comparison) with an unadjusted incidence rate ratio of 2.75 (95% confidence interval: [2.58, 2.93]). Adjusting for sex, indigenous status, socio-economic status and geographical remoteness reduced the rate ratio by 24% to incidence rate ratio 2.10, 95% confidence interval: [1.97, 2.23]. Adjusting for parental offending further reduced the rate ratio by 23% to incidence rate ratio 1.62, 95% confidence interval: [1.52, 1.72]. The mean age at first recorded offence was significantly lower for cases compared to comparison offspring. Conclusion: Children of mothers with a severe mental illness have a higher rate of offending than children of unaffected mothers, and social disadvantage and parental offending have a major impact on this rate. Services supporting these vulnerable children need to focus on improving the social environment in which they and their families live in.