Objective: This study examined the relationship between problem gambling and psychological and social adjustment in Australian adolescents. Method: A sample of 926 adolescents (mean age = 14.46 years) in the Australian Capital Territory were administered a standardized series of measures relating to gambling and psychosocial adjustment. Young people were asked to indicate how often they gambled, to report any difficulties that they might have been experiencing with gambling, and to complete a variety of measures of psychosocial health, including: the GHQ-12, Rosenberg's self-esteem scale and other measures of social functioning. Results: The results were generally consistent with previous international studies. Those adolescents classified as problem gamblers were found to have poorer scores on all psychosocial measures. Although many in the problem gambling group reported being part of a socially active peer group, they also reported being more alienated and unpopular among their classmates. Conclusions: The results suggest that problem gambling appears to be a significant risk factor for poorer mental health among Australia adolescents. Given previous adult research indicating a link between early gambling and long-term gambling problems and poorer life outcomes (e.g. Abbott, McKenna and Giles, 2000 in New Zealand), these findings suggest a need to enhance existing educational initiatives and services specifically designed to assist adolescents with gambling problems.