Background Smoking has been associated with a range of mental disorders including schizophrenia, anxiety disorders and depression. People with mental illness have high rates of morbidity and mortality from smoking related illnesses such as cardiovascular disease, respiratory diseases and cancer. As many people who meet diagnostic criteria for mental disorders do not seek treatment for these conditions, we sought to investigate the relationship between mental illness and smoking in recent population-wide surveys. Methods Survey data from the US National Comorbidity Survey-Replication conducted in 2001–2003, the 2007 Australian Survey of Mental Health and Wellbeing, and the 2007 US National Health Interview Survey were used to investigate the relationship between current smoking, ICD-10 mental disorders and non-specific psychological distress. Population weighted estimates of smoking rates by disorder, and mental disorder rates by smoking status were calculated. Results In both the US and Australia, adults who met ICD-10 criteria for mental disorders in the 12 months prior to the survey smoked at almost twice the rate of adults without mental disorders. While approximately 20% of the adult population had 12-month mental disorders, among adult smokers approximately one-third had a 12-month mental disorder – 31.7% in the US (95% CI: 29.5%–33.8%) and 32.4% in Australia (95% CI: 29.5%–35.3%). Female smokers had higher rates of mental disorders than male smokers, and younger smokers had considerably higher rates than older smokers. The majority of mentally ill smokers were not in contact with mental health services, but their rate of smoking was not different from that of mentally ill smokers who had accessed services for their mental health problem. Smokers with high levels of psychological distress smoked a higher average number of cigarettes per day. Conclusion Mental illness is associated with both higher rates of smoking and higher levels of smoking among smokers. Further, a significant proportion of smokers have mental illness. Strategies that address smoking in mental illness, and mental illness among smokers would seem to be important directions for tobacco control. As the majority of smokers with mental illness are not in contact with mental health services for their condition, strategies to address mental illness should be included as part of population health-based mental health and tobacco control efforts.