[Truncated abstract] Background: The burden of mental health problems among Aboriginal and Torres Strait Islander children is a major public health problem in Australia. While socioeconomic factors are implicated as important determinants of mental health problems in mainstream populations, their bearing on the mental health of Indigenous Australians remains largely uncharted across all age groups. Methods: We examined the relationship between the risk of clinically significant emotional or behavioural difficulties (CSEBD) and a range of socioeconomic measures for 3993 Indigenous children aged 4–17 years in Western Australia, using a representative survey conducted in 2000–02. Analysis was conducted using multivariate logistic regression within a multilevel framework. Results: Almost one quarter (24%) of Indigenous children were classified as being at high risk of CSEBD. Our findings generally indicate that higher socioeconomic status is associated with a reduced risk of mental health problems in Indigenous children. Housing quality and tenure and neighbourhood-level disadvantage all have a strong direct effect on child mental health. Further, the circumstances of families with Indigenous children (parenting quality, stress, family composition, overcrowding, household mobility, racism and family functioning) emerged as an important explanatory mechanism underpinning the relationship between child mental health and measures of material wellbeing such as carer employment status and family financial circumstances….