Background: Disability among adolescents is associated with both poorer mental health (MH) and higher levels of bullying-victimization. Bullying, therefore, conceivably mediates the association between disability and MH. Quantifying this pathway is challenging as the exposure (disability), mediator (bullying) and outcome (MH) are subjective, and subject to dependent measurement error if the same respondent reports on two or more variables. Methods: Utilizing the counterfactual and potential outcomes approaches to causal mediation, we decomposed the total effect of disability on MH into natural indirect effects (through bullying) and natural direct effects (not through bullying) using a sample of 3409 adolescents. As the study included data from multiple informants (teacher, parent, adolescent) on the outcome (MH, as measured on the Strengths and Difficulties Questionnaire) and two informants (adolescent, parent) on the mediator (bullying), we assessed the influence of dependent measurement error. Results: For preferred analysis (using parent-reported bullying and adolescent-reported MH), the total effect was a 2.18 [95% confidence interval (CI): 0.66-3.40] lower MH score for adolescents with a disability, compared with those with no disability (strength of association equivalent to 37% of the standard deviation for MH). Bullying explained 46% of the total effect. Use of adolescent-reported bullying with adolescent-reported MH produced similar results (37% mediation, 95% CI: 12-74%). Conclusions: Disability exerts a detrimental effect on adolescent MH, and a large proportion of this appears to operate through bullying. This finding does not appear to be spurious due to dependent measurement error.