Purpose: To examine rural-urban differences in the use of mental health services (mental health and substance abuse office visits, and mental health prescriptions) and in the out-of-pocket costs paid for these services. Methods: The pooled 2003 and 2004 Medical Expenditure Panel Surveys were used to assess differences in mental health service use by rural and urban residence and average per person mental health expenditures by payer and by service type. Findings: Study findings reveal a complicated pattern of greater need among rural than urban adults for mental health services, lower rural office-based mental health use and higher rural prescription use, and no rural-urban differences in total or out-of-pocket expenditures for mental health services. Conclusions: These findings raise questions about the appropriateness and quality of mental health services being delivered to rural residents. Lower mental health spending among rural residents is likely explained by lower use of psychotherapy and other office-based services, but it may also be related to these services being delivered by lower-cost providers in rural areas. Findings suggest that an approach focusing on reducing underinsurance for all health services among rural residents may help to reduce unmet mental health needs among the rural privately insured.