In this paper, we employ a classical experiment to determine if welfare reform causes poor women to experience increased levels of clinical anxiety and depression. We organize our analyses around the insights provided by lifestyle change and ecosocial theories of illness. Our data come from the New Jersey Family Development Program (FDP), one of the most highly publicized welfare experiments in the U.S. A sample of 8393 women was randomly assigned into two groups, one which stressed welfare-to-work and the other which offered traditional welfare benefits. These women were followed from 1992 through 1996 and information on clinical diagnoses was collected quarterly from physician treatment claims to the government Medicaid program. Our intention-to-treat estimates show that for short-term welfare recipients FDP decreased the prevalence of anxiety by 40% and increased depression by 8%. For black women both anxiety and depression diagnoses declined while Hispanic women experienced a 68% increase in depression. We discuss several public policy implications which arise from our work.