The rapid urbanization and environmental degradation in Dhaka City, Bangladesh, have raised concerns about their potential impacts on residents' mental health. This study aims to explore the relationship between environmental quality in specific Dhaka City neighborhoods—Farmgate and Bashundhara Residential Area—and the mental health of its residents. Employing a quantitative methodology, we gathered data from 503 participants using online surveys, focusing on environmental factors such as noise, air, and water quality, alongside mental health indicators captured through the General Health Questionnaire (GHQ-12) and Residential Environmental Assessment Tool (REAT 2.0). Statistical analyses, including simple linear regression and Pearson’s chi-square tests, revealed a significant association between poor environmental quality, especially noise pollution, and adverse mental health outcomes, including reduced concentration, sleep disturbances, decreased confidence, and diminished overall happiness. The study highlights the critical influence of urban environmental conditions on psychological well-being, underscoring the need for integrating mental health considerations in urban planning and policymaking. These findings contribute to the growing evidence on the environmental determinants of mental health and call for enhanced strategies to mitigate these impacts in urban settings.