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__Abstract__ Background: Unemployed persons have a poorer health compared with employed persons and unemployment may cause ill health. The aim of this study was to investigate the effect of re-employment on quality of life and health among unemployed persons on social benefits. Methods. A prospective study with 18 months follow-up was conducted among unemployed persons (n=4,308) in the Netherlands, receiving either unemployment benefits or social security benefits. Quality of life, self-rated health, and employment status were measured at baseline and every 6 months of follow up with questionnaires. Generalized estimating equations (GEE) modeling was performed to study the influence of re-employment on change in self-rated health and quality of life over time. Results: In the study population 29% had a less than good quality of life and 17% had a poor self-rated health. Persons who started with paid employment during the follow-up period were more likely to improve towards a good quality of life (OR 1.76) and a good self-rated health (OR 2.88) compared with those persons who remained unemployed. Up to 6 months after re-employment, every month with paid employment, the likelihood of a good quality of life increased (OR 1.12). Conclusions: Starting with paid employment improves quality of life and self-rated health. This suggests that labour force participation should be considered as an important measure to improve health of unemployed persons. Improving possibilities for unemployed persons to find paid employment will reduce socioeconomic inequalities in health.