This study examined the relationship between positive irrational beliefs, or positive illusions, and mental health. It attempted to address previous issues with inferential methods for assessing such beliefs by directly assessing positive irrational beliefs relating to the self, control, and optimism. The study included 1243 participants who completed the survey questionnaire. A two-step structural equation modeling framework was used to test associations between positive irrational beliefs and mental health constructs. This allowed for a componential analysis separating a higher order factor, likely representing positive mood from positive irrational beliefs. The study showed that positive irrational beliefs were consistently associated with poor mental health outcomes (i.e. increased emotional distress, reduced self-esteem and optimism, and reduced use of effective coping strategies). The higher order factor instead demonstrated associations with better mental health outcomes. It is concluded that positive illusions may be negative defence mechanisms that are detrimental to people’s long-term mental health.