The "Healthy Immigrant Effect" (HIE) suggests that immigrants have a health advantage over the domestic-born which vanishes with increased length of residency. Most HIE research focuses on physical health, with less attention given to mental health (MH). This systematic review of 58 MH studies examines whether there is a MH advantage among immigrants and explores changes in immigrants' MH, besides critically assessing the use of HIE theory. Inconsistent evidence was detected regarding the presence of MH advantage, whereas consistent, convincing evidence was revealed for a decline in immigrants' MH over years. Although the HIE theory can help reveal MH disparities, this theory alone does not explain the reasons for these disparities nor inform about potential avenues to improve immigrants' MH. A paradigm shift is needed to incorporate other potential theoretical concepts/frameworks, including the "Health Inequalities Action" framework, for a broader understanding of MH issues and to inform effective, culturally-sensitive interventions. © 2021. The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.