BACKGROUND: South Africa is one of the most 'unequal' societies in the world. Despite apartheid ending more than 20 years ago, material inequalities remain interwoven with ethnic/racial inequalities. There is limited research on the prevalence/predictors of common mental disorders (CMD) among young people. Adolescence is a unique time-point during which intervention may lead to improved mental health and reduced social problems later. The study objective was to assess mental health disparities in a representative sample of adolescents growing up in South Africa. METHODS: Cross-sectional associations of race/ethnicity and material disadvantage with CMD and Post Traumatic Stress Disorder (PTSD) were assessed in a stratified random sample representative of school-attendees, aged 14-15 years, in a large metropolitan area of Cape Town. Validated instruments assessed mental disorders; these included: Harvard Trauma Questionnaire (PTSD); Short Moods and Feelings Questionnaire (depression); Zung self-rated anxiety scale (anxiety). Self-ascribed ethnicity was determined using procedures similar to the South African census and previous national surveys. RESULTS: Response rate was 88% (1034 of 1169 individuals). Adolescents experienced a high prevalence of depression (41%), anxiety (16%) and PTSD (21%). A gradient between material disadvantage and CMD/ PTSD was evident across all ethnic/racial groups. Respondents self-identifying as 'black' or 'coloured' were disadvantaged across most indicators. After adjusting for confounders, relative to white children, relative risk (RR) of CMD in black children was 2.27 (95% CI:1.24, 4.15) and for PTSD was RR: 2.21 (95% CI:1.73, 2.83). Relative risk of CMD was elevated in children self-identifying as 'coloured' (RR: 1.73, 95% CI:1.11, 2.70). Putative mediators (violence, racially motivated bullying, social support, self-esteem) partially accounted for differences in CMD and fully for PTSD. CONCLUSIONS: Adolescent mental health inequalities in Cape Town are associated with material disadvantage and self-identification with historically disadvantaged groups.