Due to small sample sizes, previous studies on indigenous people in Taiwan seldom conducted quantitative analyses to describe the relationship between residence region and mental health of indigenous peoples in Taiwan. This study used the sample data of indigenous people (N = 2057) of “Sampling and Implementation of Questionnaire Survey on Social Changes and Policy Assessment of Indigenous Peoples in Taiwan” in 2007 to investigate the influence of residences of indigenous peoples on their mental health through intervening variables of education, occupation, income, and social support. This study found indigenous people in townships had a lower educational level, occupation status, and income than those in urban areas. However, when individual background variables were controlled, the education gap between townships and urban area disappeared, and the occupations that were advantageous in plain townships became more remarkable. While education had a highly significant positive influence on mental health, the influence of occupation, income, and social support on mental health were insignificant. Moreover, there was no significant difference in mental health among indigenous people in the three residence areas.