ObjectivesThis study aimed to determine that workers’ sleep and labor productivity differ with the telework frequency and that the optimal telework frequency depends on workers’ psychological distress.MethodsA cross-sectional study using an online-based questionnaire was conducted with 2,971 workers employed by Japanese companies from October to December 2021. We used the 6-item Kessler Scale, K6, as a nonspecific psychological distress scale to screen mental health conditions. A score of ≤ 4 was defined as low psychological distress (LPD), and a score of ≥ 5 was defined as high psychological distress (HPD). We used the Athens Insomnia Scale (AIS) as a measure of sleep quality. The Utrecht Work Engagement (UWES) and Work Functioning Impairment (WFun) scales were used as measures of labor productivity. Series of analysis of covariance (ANCOVA) was used for the data analysis.ResultsThe analysis included 2,013 participants (1,390 men and 623 women; mean age 43.2 years, standard deviation 11.3). Multiple comparison tests showed that among the participants categorized HPD (HPD type), the AIS estimates were lowest in the 1–2 d/wk group, with significant differences between the 0–3 d/m and ≥ 5 d/wk groups. UWES estimates were lowest in the 3–4 d/wk group with significant differences between the participants categorized LPD (LPD type) and HPD type, while no significant differences were observed among the LPD type. The WFun estimates among the LPD type decreased significantly with increasing telework frequency, while no significant differences were observed among the HPD type.ConclusionsThe optimal telework frequency for sleep and labor productivity may depend on the workers’ psychological distress. The finding of this study could make a great contribution to occupational health activities and health promotion for teleworkers, which is necessary to make teleworking a sustainable work style.