Female sex workers (FSWs) are at increased risk of mental health problems, including mood disorders and substance abuse, and we need to understand the origins of these to treat and prevent them, and particularly understand how the context in which they sell sex impacts their mental health. We conducted a multi-stage, community-centric, cross-sectional survey of 3005 FSWs linked to SW programmes in twelve sites across all nine provinces of South Africa. We interviewed adult women who had sold sex in the preceding six months, who were recruited via SW networks. We found that FSWs have very poor mental health as 52.7% had depression and 53.6% has post-traumatic stress disorder (PTSD). The structural equation model showed direct pathways from childhood trauma and having HIV+ status to mental ill-health. Indirect pathways were mediated by food insecurity, controlling partners, non-partner rape, harmful alcohol use, substance use to cope with SW, indicators of the circumstances of SW, i.e., selling location (on streets, in taverns and brothels), frequency of selling and experiencing SW stigma. All paths from childhood trauma had final common pathways from exposure to gender-based violence (non-partner rape or intimate partner violence) to mental ill-health, except for one that was mediated by food insecurity. Thus, FSWs’ poor mental health risk was often mediated by their work location and vulnerability to violence, substance abuse and stigma. The potential contribution of legal reform to mitigate the risks of violence and mental ill-health are inescapable. Treatment of mental ill-health and substance abuse should be an essential element of FSW programmes.