A review of English-language journals published since 1990 and three global mental health reports identified 11 community studies on the association between poverty and common mental disorders in six low- and middle-income countries. Most studies showed an association between indicators of poverty and the risk of mental disorders, the most consistent association being with low levels of education. A review of articles exploring the mechanism of the relationship suggested weak evidence to support a specific association with income levels. Factors such as the experience of insecurity and hopelessness, rapid social change and the risks of violence and physical ill-health may explain the greater vulnerability of the poor to common mental disorders. The direct and indirect costs of mental ill-health worsen the economic condition, setting up a vicious cycle of poverty and mental disorder. Common mental disorders need to be placed alongside other diseases associated with poverty by policy-makers and donors. Programmes such as investment in education and provision of microcredit may have unanticipated benefits in reducing the risk of mental disorders. Secondary prevention must focus on strengthening the ability of primary care services to provide effective treatment.