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Abstract Background Although most countries in the European Union are richer and healthier than ever, health inequalities remain an important public health challenge. Health-related problems and premature death have disproportionately been reported in disadvantaged neighbourhoods. Neighbourhood social capital is believed to influence the association between neighbourhood deprivation and health in children and adolescents, making it a potentially interesting concept for policymakers. Methods This study aims to review the role of social capital in health inequalities and the social gradient in health and well-being of children and adolescents. A systematic review of published quantitative literature was conducted, focussing on (1) the mediating role of neighbourhood social capital in the relationship between socio-economic status (SES) and health-related outcomes in children and adolescents and (2) the interaction between neighbourhood social capital and socio-economic characteristics in relation to health-related outcomes in children and adolescents. Three electronic databases were searched. Studies executed between 1 January 1990 and 1 September 2011 in Western countries (USA, New Zealand, Australia and Europe) that included a health-related outcome in children or adolescents and a variable that measured neighbourhood social capital were included. Results Eight studies met the inclusion criteria for the review. The findings are mixed. Only two of five studies confirmed that neighbourhood social capital mediates the association between neighbourhood deprivation and health and well-being in adolescents. Furthermore, two studies found a significant interaction between neighbourhood socio-economic factors and neighbourhood social capital, which indicates that neighbourhood social capital is especially beneficial for children who reside in deprived neighbourhoods. However, two other studies did not find a significant interaction between SES and neighbourhood social capital. Due to the broad range of studied health-related outcomes, the different operationalisations of neighbourhood social capital and the conceptual overlap between measures of SES and social capital in some studies, the factors that explain these differences in findings remain unclear. Conclusions Although the findings of this study should be interpreted with caution, the results suggest that neighbourhood social capital might play a role in the health gradient among children and adolescents. However, only two of the included studies were conducted in Europe. Furthermore, some studies focussed on specific populations and minority groups. To formulate relevant European policy recommendations, further European-focussed research on this issue is needed.