The main aim of this study was to explore the mediating role made by work environment to health inequalities by wage income in Sweden. Gender differences were also analysed. Data from the Swedish Survey of Living Conditions for the years 1998 and 1999 were analysed. Employed 20-64-year olds with a registered wage were included (nearly 6000 respondents). Sex-specific logistic regressions in relation to global self-rated health were applied. Those in the lowest income quintile had 2.4 times (men) and 4.3 times (women) higher probability of less than good health than did those in the highest quintile (adjusted for age, family status, country of birth, education level, smoking and full-time work). The mediating contribution of work environment factors to the health gradient by income was 25 per cent (men) and 29 per cent (women), respectively. This contribution was observed mainly from ergonomic and physical exposure, decision authority and skill discretion. Psychological demands did not contribute to such inequalities because mentally demanding work tasks are more common in high income as compared with low income jobs. Using sex-specific income quintiles, instead of income quintiles for the entire sample, gave very similar results. In conclusion, work environment factors can be seen as important mediators for the association between wage income and ill health in Sweden. A larger residual effect of income on health for women as compared with men suggests that one's own income from work is a more important determinant of women's than men's ill health in Sweden.