The evidence for adverse effects of ambient particulate matter (PM) pollution on mental disorders (MDs) is limited, especially in developing countries. This study aimed to quantify both PM related health impacts and corresponding economic loses for overall and specific MDs in southwestern China. Data regarding 134,292 hospital admissions for MDs were collected from local Compulsory Medical Insurance Database in 2013–2017. A generalized additive model (GAM) was applied to estimate the exposure-response effects of PM pollution on hospital admissions for MDs. And the cost of illness method (COI) was adopted to further assess corresponding hospitalization costs and productivity loses. It was showed that PM pollution was significantly related to hospital admissions for overall and specific MDs. Each 10 μg/m³ increase in concentrations of PM₁₀ (particles with an aerodynamic diameters ≤10 μm), PM_2.5 (≤ 2.5 μm) and PMc (2.5 μm < c < 10 μm) at the cumulative lag03 day would be responsible for 3.25% (95%CI: 2.34–4.16%), 6.38% (95%CI: 4.79–7.97%), and 3.81% (95%CI: 2.13–5.50%) increments in daily hospital admissions for MDs, respectively. Stronger associations were observed in males, cool season and people over 45 years. During the study period, PM pollution brought 1453.18 million Yuan economic losses for overall MDs, accounting for 0.026% of local GDP. This study suggested that short-term exposure to PM pollution, especially to PM_2.5, was associated with increased hospital admissions for MDs in southwestern China. In addition, potential benefits of lowering PM concentrations are considerable.