BACKGROUND:While prior research links income inequality to poor mental health, many studies suffer from methodological limitations. We aimed to examine the effect of income inequality on psychological distress, employing longitudinal, nationwide Canadian data. METHODS:Data were drawn from the Longitudinal and International Study of Adults (LISA), a large, nationwide sample of Canadians aged 15 years or older. We investigated the effect of income inequality at the Canadian census division level (measured by Gini coefficients) on psychological distress, using Kessler-10 scores over a 4-year follow-up (2016-2020). RESULTS:At baseline, the sample had a mean age of 47.7 years, and 50.6% were female, with a mean census division Gini coefficient of 0.33. Mixed effects multilevel regression revealed that residing in the more income-unequal census division quartiles was associated with increased psychological distress over the follow-up, even after adjusting for individual and area-level confounders. Notably, this association was more pronounced in male and lower-income participants. CONCLUSIONS:Leveraging a large, nationwide longitudinal sample and rigorous statistical analysis, our findings reveal a significant association between area-level income inequality and mental health trajectories.