Depression and anxiety among adolescents are major public health concerns. Findings indicate that income inequality was associated with increased risk for depression and anxiety among adolescents; however, this has not been tested longitudinally. We aim to quantify the longitudinal association between income inequality and depression and anxiety among Canadian adolescents. We used longitudinal data on 21,141 students from three waves (2016/17–2018/19) of the Cannabis, Obesity, Mental health, Physical activity, Alcohol, Smoking, and Sedentary behavior (COMPASS) school-based study. Multilevel modeling was used to assess the association between census division (CD)-level income inequality and depressive and anxiety symptoms and odds for depression and anxiety over time. Across CDs, the mean Gini coefficient was 0.37 (range: 0.30, 0.46). Attending schools in CDs with higher levels of income inequality was associated with higher depressive scores (ß = 0.08; 95% confidence interval CI = 0.02, 0.14) and an increased odds for depression (odds ratio = 1.55, 95% CI = 1.06, 2.28) over time. Income inequality was not significantly associated with anxiety symptoms or experiencing anxiety over time. Additional analyses showed that income inequality was associated with higher depressive scores among females (ß = 0.10; 95% CI = 0.01, 0.18) and males (ß = 0.08, 95% CI = 0.01, 0.15) and for anxiety scores among females (ß = 0.13, 95% CI = 0.04, 0.22), but not among males (ß = −0.01, 95% CI = −0.09, 0.06). Findings from this study indicated that income inequality is associated with depression over time among adolescents. This study highlights key points of intervention for the prevention of mental illness in adolescents.