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Empirical research on migration has mostly concentrated on its economic impacts, with growing but limited focus on its mental health impacts in migrant‐sending communities. Existing studies mainly concentrate on the mental health of remaining household members, mostly establishing cross‐sectional correlations, with mixed findings depending on individual and contextual characteristics. Studies that address potential endogeneity are few and tend to find no significant causal impact of migration on the mental health of remaining family members. However, migration may affect not only the remaining household members but also the entire sending community by changing its demographic, social and economic composition. The aim of this paper is to analyse the overall impact of migration on the mental health of sending communities, considering both the impact of having a migrant family member and of living in a community experiencing net emigration. The paper addresses potential endogeneity through an instrumental variable approach, controlling for confounding factors and examines mental health outcomes beyond depression and stress, assessing also psychosocial difficulties and self‐efficacy. It uses nationally representative data from the 2017 National Health Survey in Chile, a country characterised by high internal mobility, significant mental health issues and concentration of mental healthcare provision in large urban centres. The study finds that living in net emigration municipalities increases the probability of experiencing a major depressive episode, psychosocial difficulties and low self‐efficacy. Results are robust to controlling for endogeneity using past migration rates as an instrument for current migration rates. These findings suggest that smaller, net emigration communities require policy attention, and in particular better mental healthcare provision, to avoid increasing the prevalence of mental health problems and the treatment gap between larger and smaller communities in Chile. [ABSTRACT FROM AUTHOR]