Importance: Generous parental leave benefits have been associated with better mental health outcomes for parents after childbirth. However, few studies account for preconception mental health and working conditions, the latter being a requirement for generous parental leave benefits. Objective: To evaluate the association between levels of parental leave benefits and maternal postpartum mental health when preconception mental health, income, and employment status were considered. Design, Setting, and Participants: This population-based nationwide cohort study included first-time mothers aged 18 to 52 years who gave birth to a live singleton offspring between January 1, 2007, and December 31, 2011. Data were analyzed from March 8 to February 18, 2025. Exposure: Paid parental leave benefits, including higher level (qualified for earnings-related benefits equal to approximately 80% of their salary) vs basic level (a flat-rate benefit for those not meeting the work requirements for earnings-related benefits). Main Outcomes and Measures: Nationwide registers were used to perform multivariable logistic regression to calculate the odds of mental health outcomes from different levels of severity (prescription of antidepressants or anxiolytics, specialist outpatient care, and hospitalization) between mothers receiving higher-level and basic benefits. Decomposition analyses using the Karlson-Holm-Breen method were conducted to examine the contribution of preconception mental health, income, and employment status. Results: The sample included 210 800 first-time mothers (mean [SD] age, 28.6 [5.0] years), of whom 35 255 (16.72%) received basic benefits and 175 545 (83.28%) qualified for higher-level benefits. Mothers receiving basic benefits had higher odds of being prescribed antidepressants or anxiolytics (odds ratio [OR], 1.44; 95% CI, 1.37-1.51), receiving specialist outpatient care (OR, 2.27; 95% CI, 2.13-2.44), and being hospitalized (OR, 2.47; 95% CI, 2.06-2.97) compared with mothers receiving higher-level benefits. Higher odds remained after adjusting for preconception mental health, accounting for a 46.1% decrease for prescribed antidepressants or anxiolytics, 15.1% for outpatient care, and 10.7% for hospitalization. After adjustment for income and employment status, the odds remained elevated for specialist outpatient care (OR, 1.13; 95% CI, 1.02-1.24) and hospitalization (OR, 1.34; 95% CI, 1.03-1.76). Conclusions and Relevance: In this cohort study of first-time mothers in Sweden, higher-level benefits were associated with better mental health, particularly moderate-to-severe mental disorders. However, since eligibility for higher-level parental leave benefits is contingent on labor market attachment, both improving women's labor market attachment and relaxing the work requirements for higher-level parental leave could promote women's postpartum mental health.