Using a difference-in-difference approach, we test the causal link between environmental disasters and mental health indicators in rural areas of Peru by exploiting the spatial variation of exogeneous oil spills as well as the differences in their timing for the period 2014–16. We find that, after controlling for time-varying controls and for year fixed effects, oil spills lead to significantly higher probability of suffering psychological distress, such as lack of motivation, fatigue or feeling of failure. In particular, we find that an individual is 25.2 percentage points more likely to suffer from depression after an oil spill occurrence. Falsification tests provide further support that the main results are not simply the result of spurious correlations.