Background: Explanations for mental disorders in India can be influenced by biomedicine, systems of traditional medicine and supernatural beliefs. Community beliefs about causes of mental distress influence help-seeking behaviours. This study aimed to assess local knowledge and understanding of causes and risks for mental disorders in a rural area of Maharashtra, and to assess the prevalence of possible common mental disorders. Methods: A cross-sectional mental health literacy survey was undertaken in late 2007. A questionnaire was administered to 240 systematically sampled community members and 60 village health workers (VHWs). Participants were presented with two vignettes describing people experiencing symptoms of mental disorders (depression, psychosis); they were asked about the causes of the problems and the vulnerabilities of community sub-groups. Additionally, the General Health Questionnaire (GHQ12) was administered to assess prevalence of possible common mental disorders. Results: The most commonly acknowledged causes of the problems were a range of socioeconomic factors. Supernatural and biological explanations were not widely endorsed. Women, the unemployed and the poor were judged as more likely to develop mental disorders, while both young and older people were perceived to be less vulnerable. Results of the GHQ12 indicated that 27% had a possible common mental disorder and that the elderly were at increased risk, contrary to community perceptions. Conclusion: Enhancing mental health literacy of both VHWs and community members using approaches that are sensitive to local conceptualizations of mental health and illness will contribute to improved treatment and care for people with mental disorders. Further investigation of mental health among the elderly in this community is indicated.