BACKGROUND: Prospective data from over 10 years of follow-up were used to examine neighbourhood deprivation, social fragmentation and trajectories of health. METHODS: From the third phase (1991-93) of the Whitehall II study of British civil servants, SF-36 health functioning was measured on up to five occasions for 7834 participants living in 2046 census wards. Multilevel linear regression models assessed the Townsend deprivation index and social fragmentation index as predictors of initial health and health trajectories. RESULTS: Independent of individual socioeconomic factors, deprivation was inversely associated with initial SF-36 physical component summary (PCS) score. Social fragmentation was not associated with PCS scores. Deprivation and social fragmentation were inversely associated with initial mental component summary (MCS) score. Neighbourhood characteristics were not associated with trajectories of PCS score or MCS score for the whole set. However, restricted analysis on longer term residents revealed that residents in deprived or socially fragmented neighbourhoods had lowest initial and smallest improvements in MCS score. CONCLUSIONS: This longitudinal study provides evidence that residence in a deprived or fragmented neighbourhood is associated with poorer mental health and that longer exposure to such neighbourhood environments has incremental effects. Associations between physical health functioning and neighbourhood characteristics were less clear. Mindful of the importance of individual socioeconomic factors, the findings warrant more detailed examination of materially and socially deprived neighbourhoods and their consequences for health.