ObjectivesCurrent mental health practices for people living in residential aged care (RAC) facilities are poor. In Australia, there are no mechanisms to monitor and promote mental health for people living in RAC, including those who experience changed behaviours and psychological symptoms. The aim of this study is to improve current practices and mental health outcomes for people living in RAC facilities by codesigning a Mental Health benchmarking Industry Tool for residential aged Care (MHICare Tool).MethodsA two-stage sequential and mixed methods codesign methodology will be used. Stage 1 will include qualitative interviews and focus groups to engage with residents, family/care partners and RAC staff to ascertain mental healthcare practices and outcomes of greatest significance to them. Adapted concept mapping methods will be used to rank identified issues of concern in order of importance and changeability, and to generate draft quality indicators. Stage 2 will comprise a Delphi procedure to gain the wider consensus of expert panel views (aged care industry, academic, clinical) on the performance indicators to be included, resulting in the codesigned MHICare Tool.Ethics and disseminationThis study has been reviewed and approved by the University of Queensland Human Research Ethics Committee (HREC/2019002096). This project will be carried out according to the National Statement on Ethical Conduct in Human Research (2007). The study’s findings will be published in peer-reviewed journals and disseminated at national and international conferences and through social media.ConclusionThis protocol reports structured methods to codesign and develop a mental health performance indicator tool for use in Australian RAC.