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Objectives: In this study, we extend previous research by re-examining the ethnic density effects on mental health of British ethnic minorities and exploring how the relationship varies across generations at a lower geographic scale Lower Super Output Areas (official census geographical classification designed for the consistent reporting of local statistics). Methods: We used random intercept logistic multilevel models to analyze the second wave (2010-2011) of the United Kingdom Household Longitudinal Study (UKHLS). Results: The results show that after controlling for neighborhood deprivation, respondents' socio-demographic characteristics, duration of stay in a neighborhood and moving preference, ethnic concentration has a detrimental effect on mental health for Pakistanis, Bangladeshis, black Caribbeans and black Africans. Moreover, the results show that the detrimental effects are particularly pronounced for the first-generation Pakistanis, Bangladeshis and Indians compared to their second-generation counterparts. Conclusions: Policy interventions to ameliorate ethnic disadvantages in mental health may need to be more targeted to first-generation South Asian minorities living in ethnically clustered areas, and that previous research overlooking migration generation may conceal important internal differences within British ethnic minorities.