Researchers and policy-makers are increasingly recognizing that urban socio-environmental conditions can affect the development and course of numerous health problems. The aim of this paper is to investigate the impact an urban regeneration programme can have on everyday functioning, coping and recovery for people with a mental illness. We were also interested in discerning which component parts of the regeneration are the most important in positively affecting people with mental illness. These questions were explored through an in-depth qualitative case study of the Gospel Oak neighbourhood in London, which recently underwent an intensive urban regeneration programme. Interviews and focus groups were conducted with residents living with a mental illness (n = 16). Relevant participant observation was also conducted. Participants reported that interventions that improved community safety were by far the most important in affecting everyday coping and functioning. Interventions that improved the quantity and quality of shared community facilities had a positive, but milder effect on mental health. Component parts that appeared to have little effect included environmental landscaping and greater community involvement in decision-making processes. Most participants reported that their mental illness was a consequence of severe insults over the life-span, for example childhood neglect or family breakdown. Thus, the regeneration was seen as something that could assist coping, but not something that could significantly contribute to complete recovery. Our results thus suggest that urban regeneration can have a mild impact on people with mental illness, but this appears to be outweighed by life-span experience of severe individual-level risk factors. That said, some of our findings converge with other studies indicating that community safety and community facilities can play a role in positively affecting mental health. Further ethnographic and epidemiological research is necessary to explore these two factors.