Background: The association between food insecurity and mental health is established. Increasingly, associations between drought and mental health and drought and food insecurity have been observed in a number of countries. The impact of drought on the association between food insecurity and mental health has received little attention. Methods: Population-based study using data from a nationally representative panel survey of Australian adults in which participants report behaviour, health, social, economic and demographic information annually. Exposure to drought was modelled using annual rainfall data during Australia's 'Big Dry'. Regression modelling examined associations between drought and three indicative measures of food insecurity and mental health, controlling for confounding factors. Results: People who reported missing meals due to financial stress reported borderline moderate/high distress levels. People who consumed below-average levels of core foods reported more distress than those who consumed above the average level, while people consuming discretionary foods above the average level reported greater distress than those consuming below the threshold. In all drought exposure categories, people missing meals due to cost reported higher psychological distress than those not missing meals. Compared to drought-unadjusted psychological distress levels, in most drought categories, people consuming higher-than-average discretionary food levels reported higher levels of distress. Conclusions: Exposure to drought moderates the association between measures of food insecurity and psychological distress, generally increasing the distress level. Climate adaptation strategies that consider social, nutrition and health impacts are needed.