ObjectivesThis paper investigates the relationship between part-time and full-time employment and mental health for people with and without disability, as well as differences in the relationship by age and sex.MethodsUsing data from 13,219 working-aged people (15–64 years) in the labour force who participated in five annual waves of a longitudinal cohort study in Australia, the analysis used fixed effect regression models to examine within-person changes in mental health associated with changes in employment status (full-time; part-time; unemployed). Differences in the relationship between employment status and mental health by disability, sex, and age were assessed.ResultsAmong people with disability, there was evidence that working part-time and full-time were associated with a 4.2-point (95% CI 2.6, 5.7) and 6.0-point (95% CI 4.4, 7.6) increase in mental health scores compared with when they were unemployed. For people without disability, there were much smaller differences in mental health associated with working part-time (β= 1.0, 95% CI 0.2, 1.9) and full-time (β= 1.4, 95% CI 0.5, 2.2) compared with when they were unemployed. The positive effects of both part-time and full-time employment were of greater magnitude for people with disability aged younger than 45 years compared to those aged 45 years and older.ConclusionsThe results of this study suggest that both part-time and full-time employment may have beneficial effects on the mental health of people with disability, particularly for younger people. The findings underscore the value of employment for people with disability, given we found much larger beneficial mental health effects in comparison to people without disability.