RATIONALE: The number of older parents living without adult children has increased dramatically over the last decades. However, recent trends exacerbated by the Great Recession have led to an increase in intergenerational co-residing. METHODS: We used three waves of data (2004-2010) from the Survey of Health, Ageing and Retirement in Europe (SHARE) collected around the Great Recession to assess the effects of intergenerational co-residence on mental health in later life (n = 50,043). We used an instrumental variable (IV) approach that exploits changes in employment opportunities of adult children during the Great Recession to examine the impact of co-residing with adult children on depression scores measured using the Euro-D scale of depression. RESULTS: Northern European countries exhibited low levels of both co-residence and depression in older age, while most countries in Eastern and Southern Europe had high levels of both co-residence and depression. In OLS models that controlled for measured characteristics, co-residing with an adult child was not associated with depressive symptoms in older parents (β = -0.0387; 95% CI -0.0892 to 0.0118). By contrast, results from IV models suggest that co-residing with an adult child significantly reduces depressive symptoms by 0.731 points (95% CI -1.261 to -0.200) on the 12-item scale. Results were robust to a series of robustness checks including controls for child characteristics, country-specific time trends, and analyses restricted to homeowners. CONCLUSIONS: Our findings suggest that, in the context of high unemployment rates during the Great Recession in Europe, increased intergenerational exchange between adult children and older parents in the form of co-residence had positive mental health effects on older parents.