This working paper was commissioned by Barnardos Australia, through its Centre for Excellence in Open Adoption, to establish how open adoption can support the best interests of children in optimising developmental outcomes and establishing healthy identity formation. This paper focuses on children who are up to 5 years of age in out-of-home care (OOHC) for whom there is no realistic chance of restoration to their birth family or kinship care. Therefore, the options facing such children, according to recent amendments to the NSW Children and Young Persons (Care and Protection) Act 1998 (hereafter referred to as the Care Act) in late 2014, are either for adoption or parental responsibility of the Minister (i.e., foster care) until they are 18 years of age. This paper also represents a first attempt to investigate the experiences of children who are adopted or placed for adoption before the age of 5 years in NSW, as well as understanding the main factors that serve to facilitate or hinder the identity development and wellbeing of such children. While this paper is not intended to provide a definitive solution as to how the identity development of adopted children can best be realised, efforts have been taken to highlight the most relevant issues for children in the NSW adoption context, as well as to outline where more work and research is needed to better understand the conditions for optimal identity formation in adopted children.