Poor physical and mental functioning is more common among people of low socioeconomic status (SES) and those with disadvantaged work and family characteristics. This study aims to clarify whether the SES inequalities in functioning can be explained by the SES differences in work and family characteristics. The subjects were 3787 male and female civil servants, aged 20-65, working in a local government on the west coast of Japan. Logistic regression analysis was performed to examine (1) whether there were employment-grade (SES) differences in poor physical and mental functioning as measured by the Short Form 36 (SF-36) and (2) whether these SES differences were explained by work and family characteristics. In general, low control at work, high demands, low social support, short and long work hours, shift work, being unmarried, high family-to-work conflict and high work-to-family conflict were independently associated with poor physical and mental functioning in both men and women. In men, the age-adjusted odds ratio (OR) of low-grade employees for poor physical functioning was 1.93 (95% confidence interval: 1.38-2.69) in comparison to high-grade employees. The grade difference was mildly attenuated, when adjusted for work and family characteristics (OR = 1.72)(1.20-2.47). The age-adjusted OR of the low-grade employees for poor mental functioning was 1.88 (1.29-2.74). The grade difference was attenuated and no longer significant when adjusted for work and family characteristics (OR = 1.51)(0.99-2.31). Among women, there were no significant grade-differences in poor physical and mental functioning. Although longitudinal research is necessary to clarify the causal nature of these associations, improvements in SES differences in work and family characteristics may be important for reducing SES inequalities in physical and mental functioning among Japanese men. The different patterns of SES inequalities in health between men and women deserve further research.