Morgan Geyser, 14, faces one count of attempted first-degree murder.
Morgan and her friend Anissa Weier invited Payton Leutner over for a birthday sleepover in May 2014. The next day they lured Payton into the woods in Milwaukee and stabbed her 19 times before fleeing.
Payton managed to crawl to a road where a cyclist found her.
The girls were found and detained later that day.
They told investigators that they hoped killing their friend would gain them favour with Slender Man, a horror figure that first popped up as an internet meme in 2009.
Morgan's lawyer said he felt the facts in the case deserved a plea of insanity.
Experts have already testified that Morgan suffers from schizophrenia and oppositional defiant disorder and maintains relationships with imaginary characters.
She will still have to be assessed by another doctor before a March trial.
At that point it will be determined if Morgan will be deemed insane and sent to a mental health hospital. If she is found to be sane, she faces up to 40 years in prison.
Anissa has also pleaded not guilty with her trial set for March as well.
Payton Leutner recovered from her injuries and has returned to school.