Abstract Background Ethnic inequalities in mental health have been found in many high-income countries. The purpose of this study is to test whether mental health inequalities between ethnic groups are mediated by exposure to unfavourable working conditions. Methods Workers ( n  = 6278) were selected from baseline data of the multi-ethnic HELIUS study. Measures included two indices of unfavourable working conditions (lack of recovery opportunities, and perceived work stress), and two mental health outcomes (generic mental health: MCS-12 and depressive symptoms: PHQ-9). Mediation of the relationships between ethnicity and mental health by unfavourable working conditions was tested using the bias-corrected bootstrap confidence intervals technique. Linear models with and without the mediators included, and adjusted for gender and age. Attenuation was calculated as the change in B between the models with and without mediators. Results The sample comprised Dutch (1355), African Surinamese (1290), South-Asian Surinamese (1121), Turkish (1090), Ghanaian (729), and Moroccan (693) workers. After controlling for age and gender, all ethnic minorities had a higher risk of mental health problems as compared to the Dutch host population, with the exception of Ghanaians in the case of depressive symptoms, and African Surinamese workers with regard to both outcomes. The Turkish group stands out with the lowest mental health on both mental health indices, followed by Moroccan and South-Asian Surinamese workers. A lack of recovery opportunities mediated the relationship between ethnic group and a higher risk of mental health problems. Perceived work stress did not contribute to the explanation of ethnic inequalities. Conclusions The higher risk of mental health problems in ethnic minority groups can be partly accounted for by a lack of recovery opportunities at work, but not by perceived work stress. This may imply that workplace prevention targeting recovery opportunities have the potential to reduce ethnic inequalities, but ethnic-specific experiences at the workplace need to be further explored.