The hippocampus and amygdala have justifiably been the focus of much mental health research due to their putative roles in top-down processing control of emotion, fear, and anxiety. However, understanding the causal relationship between these regions and mental illness has been limited as current literature is lacking in the observation of neuro-structural changes preceding first episodes. Here, we report whole and sub-structural hippocampal and amygdala volume correlates of psychological distress in early adolescence. Automated hippocampal subfield and amygdala nuclei segmentation was carried out in 32 participants (12–13 years old) recruited for the Longitudinal Adolescent Brain Study (LABS) who had psychological distress scores measured by the Kessler-10. Partial correlation analyses revealed significant negative association between left whole amygdala volume and psychological distress. Sub-structure analysis revealed that smaller left hippocampal CA1 volume and left basal and accessory basal amygdala nuclei volumes were all significantly associated with higher levels of psychological distress. Four-month follow-up analysis also revealed an association between change in K10 and CA1 volume suggesting a continued relationship between this hippocampal substructure and psychological distress. Grey matter volume of subcortical sub-structures involved within the hippocampal-basolateral amygdala-prefrontal cortex loop are highly correlated and are significantly reduced in adolescents with higher levels of psychological distress, indicating these nuclei and subfields play an important role in the emergence of mental illness.