Research suggests that physical and social aspects of the neighbourhood have a bearing on our well-being. As part of the Pacific Islands Families Study, this study examined maternal perceptions and socio-demographic determinants of neighbourhood problems and their association with mental health. The main problems reported centred on noise, pollution and safety matters. Ethnicity, deprivation and alcohol consumption were the best predictors of greater perceived neighbourhood problems. Adjusted analyses showed that those reporting greater neighbourhood problems were almost twice as likely as those reporting fewer problems to have psychological morbidity. Mothers with high deprivation scores were 7.3 times more likely to have psychological morbidity. Findings suggest that neighbourhood quality and socio-economic position are important contributors to mental health. Negative effects on health are likely to derive from exposure to pollutants and from problem features in the neighbourhood acting as sources of psychosocial stress and barriers to health promoting activities. Improvements to services and regulations may contribute to health gains.