Background Against the background of urbanization and aging and the aim to design age-friendly cities, it is crucially important to understand whether and why older adults’ health may benefit from being surrounded by older peers mainly, or by residents from all ages. We assessed the association between neighborhood age structure and mental health and the mediating role of social neighborhood perceptions. Methods Survey data were obtained from 1255 older adults aged 65 years and over, participating in the Dutch GLOBE study. The neighborhood age structure, measured in 2011, was defined as the Herfindahl-Hirschman index to assess homogeneity in the age composition (range from 0-100, a higher score indicating more homogeneity) and percentages of different age groups in a neighborhood. Mental health was measured in 2014 by the Mental Health Inventory-5 score, ranging from 0 to 100, where a higher score indicates better mental health. Perceptions of neighborhood social cohesion, feeling at home in a neighborhood, and social participation was assessed in 2011. Linear regression models were used to assess the association of neighborhood age composition with mental health. Causal mediation analysis was used to assess the potential mediating role of social neighborhood perceptions. Results A more homogeneous neighborhood age structure was associated with better mental health status. Feeling at home in a neighborhood partly mediated the association, whereas social cohesion and social participation did not mediate the association. While a higher percentage of children in the neighborhood was associated with better mental health, a higher percentage of elderly in the neighborhood was associated with lower mental health status. Conclusions The neighborhood age composition is a promising, but currently insufficiently understood, entry point for policies addressing the challenge of growing urban and aging European cities. Key messages The neighborhood age composition is a promising, but currently insufficiently understood, entry point for policies addressing the challenge of growing urban and aging European cities. Feeling at home in a neighborhood partly mediated the association between neighborhood age structure and mental health; social cohesion and social participation did not mediate the association.