Abstract: This paper provides the first causal estimates on the popular, cost-saving practice of diversion in the criminal justice system, an intervention that provides offenders with a second chance to avoid a criminal record. We exploit two natural experiments in Harris County, Texas where first-time felony defendants faced abrupt changes in the probability of diversion. Using administrative data and regression discontinuity methods, we find robust evidence across both experiments that diversion cuts reoffending rates in half (-32 p.p.) and grows quarterly employment rates by 53 percent (+18 p.p.) over 10 years. The change in trajectory persists even 20 years out and is concentrated among young black men. An investigation of mechanisms indicates that stigma associated with a felony conviction plays a key role in generating these results. Other possible mechanisms including changes in incarceration, universal adjustments in policy or practice, and differences in criminal processing are ruled out empirically.