Objectives: To examine the levels and growth rates of absolute funding to mental health research from 2001 to 2010, compared with other National Health Priority Areas (NHPAs), and the relative rate of mental health funding compared with other NHPAs, by taking disease burden into account. The quality of Australian research in mental health was also examined using objective indicators of research strength. Design and setting: Retrospective analysis of levels of funding overall and as a function of mental health domains using data from the National Health and Medical Research Council, with and without adjustment for burden of disease. A keyword analysis was used to assess the success rate of mental health project grant applications. Objective indicators of the quality of Australian mental health research were sought from citation indicators. Main outcome measures: Funding for mental health research relative to disease burden; funding according to disease category; project grant success rates. Results: Using actual and adjusted figures, mental health research received a lower proportion of health funding than other NHPAs, including cancer, diabetes and cardiovascular disease. Research projects into substance misuse and autism were proportionately better funded than those in anxiety, depression or schizophrenia. A significant proportion of mental health research funding was awarded to research into ageing. Citation data indicated that mental health research in Australia performed better than research in neuroscience, clinical medicine, microbiology, and pharmacology and toxicology, and at a comparable level to immunology research, despite poor levels of funding. Conclusions: Low levels of funding for mental health research appear to be largely attributable to low capacity. Mental health research in Australia is of high quality, and efforts are needed to build capacity.