Health disparities related to stigmatized characteristics, including sexual orientation, have been well-documented. However, it is largely unknown whether temporal declines in stigma at a structural level contribute to concomitant reductions in health disparities between stigmatized and nonstigmatized groups. The objective of this study was to (a) explore associations between reductions in structural stigma (i.e., laws, policies, and social attitudes concerning sexual minorities) during the past decade in Sweden and sexual orientation-based mental health disparities, and (b) identify potential mechanisms that might explain this relationship. Repeated nationwide population-based cross-sectional surveys in 2005, 2010, and 2015 were conducted among individuals (16–84 years of age) in Sweden (N = 23,248 individuals, 565 self-identified as lesbian, gay, or bisexual). The interaction between structural stigma and sexual orientation was statistically significant, demonstrating a stronger reduction over 10 years in psychological distress (Wald χ2 = 6.03; p = .01) and in victimization/threat of violence (Wald χ2 = 7.00; p < .01) among gay men/lesbians as compared with heterosexuals. Further, in 2015, the sexual orientation disparity (gay men/lesbians vs. heterosexuals) in psychological distress was eliminated (adjusted odds ratios [AOR] = 0.77, 95% CI [0.39, 1.52]). Mediation analysis showed that reductions in victimization/threat of violence explained, in part, the relationship between structural stigma and the sexual orientation disparity in psychological distress. Future research is needed to identify additional mechanisms that may explain how reductions in structural stigma contribute to temporal declines in adverse mental health outcomes for all sexual minorities.