AimTo investigate the relationship between social media use and loneliness and psychological wellbeing of youth in rural New South Wales.DesignThis was a web-based cross-sectional survey.MethodsThe survey consisted of 33 items including demography (12 items), participants’ social media use (9 items), mood and anxiety (6 items), perceived loneliness (6 items), the impact of COVID-19 on social media usage or perceived loneliness (2 items). The participants’ mood and anxiety were evaluated using the psychological distress tool (K6), while loneliness was measured using the De Jong Gierveld 6-item scale. Total loneliness and psychological distress scores were compared between demographic variables.ResultsA total of 47 participants, aged 16–24 years took part in the study. The majority were women (68%) and many had K6 score that was indicative of psychological distress (68%). About half of the participants indicated that Facebook (FB) was their most used social media platform and two in five participants were on social media within 10 min of waking up each day, about 30% spent more than 20 h per week on social media, and more than two-third sent private messages, images, or videos, multiple times a day. The mean loneliness score was 2.89 (range, 0 to 6), with 0 being ‘not lonely’ and 6 being ‘intense social loneliness’. One-way ANOVA and χ2 test results showed that those who used FB most frequently had significantly higher mean scores for loneliness compared to those that used other social media platforms (p= 0.015). Linear regression analysis revealed that those who commonly used FB were more likely to report higher loneliness scores (coefficient = –1.45, 95%CI –2.63, –0.28,p= 0.017), while gender (p= 0.039), age (p= 0.048), household composition (p= 0.023), and education level (p= 0.014) were associated with severe psychological distress.ConclusionsThe study found that social media usage, particularly FB, as measured by time used and active or passive engagement with the medium, was significantly linked to loneliness, with some impact on psychological distress. Social media use within ten minutes of waking increased the likelihood of psychological distress. However, neither loneliness nor psychological distress were associated with rurality among the rural youth in this study.Supplementary InformationThe online version contains supplementary material available at 10.1186/s12888-023-04849-y.