Objectives: The aim of this study was to investigate prospective associations between participation in sports/recreational activities and the occurrence of moderate-to-severe psychological distress over 2 years in a sample of mid-aged Australians. Methods: This prospective study used data from 6699 adults aged 40+ years, living in Brisbane in 2007, and surveyed in 2009, 2011 and 2013. Participants provided self-reported data on frequency of participation in each of 11 sports/recreational activities in past 12 months and completed the Kessler Psychological Distress 6-item Scale (K6). Generalized estimating equation (GEE) models with a 2-year lag were used to assess the associations of participation in sports/recreational activities in 2009 and 2011 with new cases of moderate-to-severe psychological distress (K6 score ≥ 5) in 2011 and 2013. Results: From 2009 to 2013, 22.4% of participants without moderate-to-severe psychological distress at baseline (N = 4943) developed this outcome in at least one survey. Overall, there were no clear patterns of association between frequency of participation in sports and recreational activities and occurrence of moderate-to-severe psychological distress. In unadjusted models, weekly participation in some activities (e.g., tennis, golf, and exercise classes) was associated with reduced odds of moderate-to-severe psychological distress over the next 2 years, but these associations were attenuated in most adjusted models with sociodemographic, lifestyle, and health covariates. Participation in home-based exercise and running/jogging were associated with higher odds of psychological distress. Conclusion: Our findings do not provide strong evidence of beneficial associations of frequency of sport/recreational activities with psychological distress but show surprising negative associations of home-based exercise and running/jogging with occurrence of moderate-to-severe psychological distress over 2 years.