This paper presents a longitudinal examination of the effect of employment transitions on the psychological distress of 398 single and 454 married mothers. Our analyses reveal that the effects of employment transitions differ for single and married mothers. Among women who left their jobs during the course of this study, we find a significant increase in distress among single mothers but no change in distress among married mothers. Transitions out of employment among single mothers produce increases in financial strain that result in declines in levels of self-esteem and mastery which, in turn, manifest themselves in higher levels of psychological distress. When we examine the effects of transitions into paid work, there are surprisingly few effects on mothers' levels of distress. For single mothers, taking a job for pay offers no significant reduction in their feelings of distress. Among married mothers, transitions into employment are associated with declines in distress, but these declines are offset by the distressful consequences of increases in caregiving strain. Thus, the effects of employment transitions on distress are a function of the differential impact of changes in stressors and psychosocial resources among single and married mothers as well as variations in the economic context and meanings of employment transitions. Movements into or out of employment do not offer the same opportunities and benefits or engender the same costs for single and married mothers. Our results also highlight the different policy implications that emerge from a consideration of longitudinal as opposed to cross-sectional analyses of these issues.