Chronic inflammatory diseases (autoimmunity, allergy and inflammatory bowel diseases) are increasing in prevalence in urban communities in high-income countries. One important factor is reduced exposure to immunoregulation-inducing macro- and microorganisms and microbiota that accompanied mammalian evolution (the hygiene hypothesis or ‘Old Friends’ mechanism). Reduced exposure to these organisms predisposes to poor regulation of inflammation. But inflammation is equally relevant to psychiatric disorders. Inflammatory mediators modulate brain development, cognition and mood, and accompany low socioeconomic status and some cases of depression in developed countries. The risk of all these conditions (chronic inflammatory and psychiatric) is increased in urban versus rural communities, and increased in immigrants, particularly if they move from a low- to a high-income country during infancy, and often the prevalence increases further in second generation immigrants, suggesting that critical exposures modulating disease risk occur during pregnancy and infancy. Diminished exposure to immunoregulation-inducing Old Friends in the perinatal period may enhance the consequences of psychosocial stressors, which induce increased levels of inflammatory mediators, modulate the microbiota and increase the risk for developing all known psychiatric conditions. In later life, the detrimental effects of psychosocial stressors may be exaggerated when the stress occurs against a background of reduced immunoregulation, so that more inflammation (and therefore more psychiatric symptoms) result from any given level of psychosocial stress. This interaction between immunoregulatory deficits and psychosocial stressors may lead to reduced stress resilience in modern urban communities. This concept suggests novel interpretations of recent epidemiology, and novel approaches to the increasing burden of psychiatric disease.