Objective: Neighborhood disadvantage has been documented as a risk factor for problem drinking. The specific aim of this investigation is to test a model of neighborhood disadvantage, psychological distress, and problem drinking in a demographically and socioeconomically diverse sample. Method: A sample of 618 adults (21–65-year-olds; Mage = 30.80, SD = 9.81; 58% female) who reported drinking alcohol at least once in the past 6 months, completed an online questionnaire with questions about psychological distress (depression, stress, social isolation) and problem drinking (drinking problems, drinking to cope, binge drinking) twice over the course of 6 months. Their data were merged with the American Community Survey data from the U.S. Census Bureau to form an index of neighborhood disadvantage (median income, % residents with less than high school education, % living in poverty, % receiving income assistance). Results: A structural equation modeling analysis showed that neighborhood disadvantage was associated with increases in psychological distress during the T1–T2 interval. Psychological distress was also positively associated with problem drinking at both T1 and T2. There was an indirect effect of neighborhood disadvantage on problem drinking through increased psychological distress. However, there was no direct effect of neighborhood disadvantage on problem drinking in this sample. Conclusions: Increased psychological distress may be a key mechanism that links living in disadvantaged neighborhoods and problem drinking.