BACKGROUND: Depression and anxiety disorders are common mental disorders worldwide. The MANAS trial aimed to test the effectiveness of an intervention led by lay health counsellors in primary care settings to improve outcomes of people with these disorders. METHODS: In this cluster randomised trial, primary care facilities in Goa, India, were assigned (1:1) by computer-generated randomised sequence to intervention or control (enhanced usual care) groups. All adults who screened positive for common mental disorders were eligible. The collaborative stepped-care intervention offered case management and psychosocial interventions, provided by a trained lay health counsellor, supplemented by antidepressant drugs by the primary care physician and supervision by a mental health specialist. The research assessor was masked. The primary outcome was recovery from common mental disorders as defined by the International Statistical Classification of Diseases and Related Health Problems-10th revision (ICD-10) at 6 months. This study is registered with ClinicalTrials.gov, number NCT00446407. FINDINGS: 24 study clusters, with an equal proportion of public and private facilities, were randomised equally between groups. 1160 of 1360 (85%) patients in the intervention group and 1269 of 1436 (88%) in the control group completed the outcome assessment. Patients with ICD-10-confirmed common mental disorders in the intervention group were more likely to have recovered at 6 months than were those in the control group (n=620 [65·0%] vs 553 [52·9%]; risk ratio 1·22, 95% CI 1·00-1·47; risk difference=12·1%, 95% CI 1·6%-22·5%). The intervention had strong evidence of an effect in public facility attenders (369 [65·9%] vs 267 [42·5%], risk ratio 1·55, 95% CI 1·02-2·35) but no evidence for an effect in private facility attenders (251 [64·1%] vs 286 [65·9%], risk ratio 0·95, 0·74-1·22). There were three deaths and four suicide attempts in the collaborative stepped-care group and six deaths and six suicide attempts in the enhanced usual care group. None of the deaths were from suicide. INTERPRETATION: A trained lay counsellor-led collaborative care intervention can lead to an improvement in recovery from CMD among patients attending public primary care facilities. FUNDING: The Wellcome Trust.