Economic inequality has been found to be detrimental to psychological well‐being. However, previous studies were mostly based on cross-sectional data, drew exclusively on adults, and confined to Western developed countries. To address these shortcomings, the current study investigated the longitudinal association of income inequality with adolescent psychological well‐being in a non‐Western developing economy (i.e., China). We used the China Family Panel Studies data set with a representative sample of 3,042 adolescents (Mage = 12.59) from 20 provinces in China. Analyses showed that adolescents in more unequal provinces had lower happiness and more psychological distress. The associations between economic inequality and well‐being varied across adolescents from different socioeconomic strata. Copyright © 2019 Society for Research in Child Development.