Objective: This study investigates the relationship between levels of mental health and well-being (in terms of self-reported levels of distress) with employment and occupational status of rural residents, to better inform the provision of mental health services to those in greatest need in rural communities. Method: A stratified random sample of community residents in rural and remote New South Wales with over-sampling of remote areas as first stage of a cohort study. Psychological distress was measured using Kessler-10, inclusive of additional items addressing functional impairment (days out of role). Occupational data were classified using Australian and New Zealand Standard Classification of Occupations categories. Results: A total of 2639 adults participated in this baseline phase. Among them, 57% were in paid employment, 30% had retired from the workforce, 6% were permanently unable to work and 2% were unemployed. The highest levels of distress and functional impairment were reported in those permanently unable to work and the unemployed group with rates of 'caseness' (likely mental health disorder) varying from 57% to 69%, compared with 34% of farmers and farm managers and 29% of health workers (P < 0.01). Conclusion: The rural unemployed suffer considerable psychological distress and 'disability', yet they are not the target of specific mental health promotion and prevention programs, which are often occasioned by rural adversity, such as drought, and delivered through work-based pathways. Policy-makers and health service providers need to consider the needs of the rural unemployed and those permanently unable to work and how they might be addressed.