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The social identity approach to health argues that well-being depends on the psychosocial circumstances of the groups to which individuals belong. However, little is known about how the average level of identification in the group - 'the identification environment' - buffers the negative health consequences of stressors. We used multilevel modelling to investigate whether identification environment in a school modified the association between the students' perceptions of the quality of their school's physical environment and their reported levels of anxiety. In two representative samples of Finnish school students (N = 678 schools/71,392 students; N = 704 schools/85,989 students), weak identification environment was related to increased anxiety. In addition, in schools where identification environment was weaker, the student level relationship between perceived physical environment and anxiety was stronger, and students were more anxious. Our results provide evidence that identification environment needs to be considered when we analyse how group membership affects well-being., (© 2023 The Authors. British Journal of Social Psychology published by John Wiley & Sons Ltd on behalf of British Psychological Society.)