Background: The relationship between unemployment and poor health has been well established. Unemployment causes poor health, and poor health increases the probability of unemployment. Methods: A prospective study with 6 months' followup was conducted among unemployed participants receiving social security benefits who were capable of full-time employment and were referred to a re-employment training centre. Re-employment was defined as ending social security benefits for at least 3 months because of starting with paid employment. Health-related quality of life was measured by the 36-Item Short-Form Health Survey. A Cox proportional hazards analysis was used to determine the factors that predicted re-employment during follow-up. The influence of re-employment on changes in perceived health was investigated with linear regression analysis. Results: Unemployed participants with a poor health at baseline were less likely to return to paid employment during follow-up. Almost all dimensions of health at baseline had an influence on the likelihood of becoming employed. Among the re-employed participants, general health, physical functioning, social functioning, vitality, mental health, bodily pain and role limitations due to emotional or physical problems improved, with an effect size varying from 0.11 to 0.66.