Abstract Aims Refugees typically spend years in a state of protracted displacement prior to permanent resettlement. Little is known about how various prior displacement contexts influence long-term mental health in resettled refugees. In this study, we aimed to determine whether having lived in refugee camps v. community settings prior to resettlement impacted the course of refugees' psychological distress over the 4 years following arrival in Australia. Methods Participants were 1887 refugees who had taken part in the Building a New Life in Australia study, which comprised of five annual face-to-face or telephone surveys from the year of first arrival in Australia. Results Latent growth curve modelling revealed that refugees who had lived in camps showed greater initial psychological distress (as indexed by the K6) and faster decreases in psychological distress in the 4 years after resettling in Australia, compared to those who had lived in community settings. Investigation of refugee camp characteristics revealed that poorer access to services in camps was associated with greater initial distress after resettlement, and greater ability to meet one's basic needs in camps was associated with faster decreases in psychological distress over time. Conclusions These findings highlight the importance of the displacement context in influencing the course of post-resettlement mental health. Increasing available services and meeting basic needs in the displacement environment may promote better mental health outcomes in resettled refugees.