The objective of this study was to evaluate the clinical- and cost-effectiveness of Intensive Short-Term Dynamic Psychotherapy (ISTDP) for generalized anxiety disorder (GAD). We further aimed to examine if a key clinical process within the ISTDP framework, termed the level of mobilization of unprocessed complex emotions (MUCE), was related to outcome. The sample consisted of 215 adult patients (60.9% female) with GAD and comorbid conditions treated in a tertiary mental health outpatient setting. The patients were provided an average of 8.3 sessions of ISTDP delivered by 38 therapists. The level of MUCE in treatment was assessed from videotaped sessions by a rater blind to treatment outcome. Year-by-year healthcare costs were derived independently from government databases. Multilevel growth models indicated significant decreases in psychiatric symptoms and interpersonal problems during treatment. These gains were corroborated by reductions in healthcare costs that continued for 4years post-treatment reaching normal population means. Further, we found that the in-treatment level of MUCE was associated with larger treatment effects, underlining the significance of emotional experiencing and processing in the treatment of GAD. We conclude that ISTDP appears to reduce symptoms and costs associated with GAD and that the ISTDP framework may be useful for understanding key therapeutic processes in this challenging clinical population. Controlled studies of ISTDP for GAD are warranted.