This article is a multilevel analysis of the effects on self-reported long-term illness and mortality of the socio-economic position of the neighbourhood. Using data from the Swedish Level of Living Survey, neighbourhood social position is measured by a composite Care Need Index, (CNI) together with such indicators of individual socio-economic position as occupation and housing tenure, with adjustment for age, sex, marital status and social network. Data came from 22,236 people aged 25-74, and were collected from 1988 to 1992. The cross-sectional data were analysed using a hierarchical logistic regression model. In a second analysis, each participant was followed from the initial interview until his or her death, or until the termination of data collection (31 December 1996). A neighbourhood's low social position and an individual resident's low socio-economic position (i.e., a manual worker, or person renting a flat) were found to be associated with increased risk of long-term illness. We conclude that a neighbourhood's low socio-economic position, that is, a high score on the CNI, is a risk factor for long-standing illness above and beyond an individual's socio-economic position. The differences in mortality could be explained by the included independent individual variables.