There is lack of evidence on the health effects of perceived discrimination.We analysed the association between perceived discrimination and psychological distress, and whether socio-economic disadvantage explains this association in 15 406 men and 17 922 women in Sweden during 2004. After adjustment for age and long-term illness, frequent experiences of discrimination were associated with increased likelihood of psychological distress. Socio-economic disadvantage explained about 25% of this association. Declaration of interest None.