Objective: The objective of the study was to determine the frequency and predictors of psychological distress after a diagnosis of epilepsy. Methods: The Sydney Epilepsy Incidence Study to Measure Illness Consequences (SEISMIC) was a prospective, multicenter, community-based study of people of all ages with newly diagnosed epilepsy in Sydney, Australia. Analyses involved multivariate logistic regression and multinomial logit regression to identify predictors of psychological distress, assessed using the Hospital Anxiety and Depression Scale (HADS) and the Strengths and Difficulties Questionnaire (SDQ), as part of structured interviews. Results: Psychological distress occurred in 33% (95% confidence interval [CI] 26 to 40%) and 24% (95% CI 18 to 31%) of 180 adults at baseline and 12 months, respectively, and 23% (95% CI 14 to 33%) of 77 children at both time points. Thirty adults and 7 children had distress at baseline who recovered at 12 months, while 15 adults and 7 children had new onset of distress during this period. History of psychiatric or behavioral disorder (for adults, odds ratio [OR] 6.82, 95% CI 3.08 to 15.10; for children, OR 28.85, 95% CI 2.88 to 288.60) and higher psychosocial disability (adults, OR 1.17, 95% CI 1.07 to 1.27) or lower family functioning (children, OR 1.80, 95% CI 1.08 to 3.02) were associated with psychological distress (C statistics 0.80 and 0.78). Conclusions: Psychological distress is common and fluctuates in frequency after a diagnosis of epilepsy. Those with premorbid psychological, psychosocial, and family problems are at high risk of this adverse outcome.